The Lens is a weekly newsletter published by our Global Economics and Scenarios team to highlight developments and trends that will have the highest impact on business scenarios. For the full complimentary newsletter, subscribe today. Keep reading for an excerpt from this week’s edition on US Senate races point to unexpected Democratic sweep, Logistical and bureaucratic issues hamper EU vaccination rates, and Forecasting consensus expects uneven economic rebound for 2021.

US Senate races point to unexpected Democratic sweep

  • The Senate has 100 voting seats, with the Vice President voting in the case of a tie. At the end of the November election, the Senate stood at 50 Republican seats to 48 seats for Democrats. But the two seats for the state of Georgia were still up for grabs in an election held on January 5.
  • Writing on the evening of January 6, Democrats appear to have clinched one seat and are heavily favored to carry the second seat. If this holds, this gives the Democratic Party control of the Senate.
  • With 50 Democratic votes and the Democratic Vice President, the Senate can pass laws with only Democratic votes. Using a process known as reconciliation, a simple majority (50+1) votes are all that are required to pass legislation on spending, revenue, and the federal debt limit.

Our view: Democrats can now impose fiscal and revenue policy without relying on any Republican votes. Instead, the goal will be generating consensus within the party, focusing on the most conservative democratic voices like Senator Joe Manchin from West Virginia. This removes the concern that a pro-austerity Republican Senate would limit the ability for the Biden Administration to implement any sort of progressive fiscal policy. 
​​​​​  ​​​​​
​​​​Business implications: Expect a larger fiscal stimulus in 1Q2021 which will support lower income households, including larger checks to households and extended unemployment benefits. There is also space for the Biden Administration to tackle additional policy areas in 2021 and 2022, including significant infrastructure spending, spending to tackle climate change, and expanding health care coverage.   ​​​​​​   
Ryan Connelly, Practice Leader for Global Economics and Scenarios​​​​
Start a free trial to access our US 2020 Electoral Outlook for more insights

Logistical and bureaucratic issues hamper EU vaccination rates

  • The EU has already signed contracts with six vaccine producers (namely, Curevac, Pfizer, Moderna, AstraZeneca, J&J and Sanofi) and is in the process of approving additional vaccine supplies.
  • The EU started its mass vaccination effort, but administering the vaccines lags significantly behind the US, UK, and Canada.
  • EU member states have ordered around 2 billion doses yet supply shortages and sluggish approval processes have caused significant delays.

Our view: Vaccination rates will vary significantly between individual EU member states in the upcoming weeks, and will depend on regional government initiatives. However, vaccination should begin to pick up across the board throughout March and April and should allow for further relaxation of existing COVID-19 measures. Markets such as Germany, France, Spain, Italy and the Visegrad Four (Poland, Hungary, Czech Republic, and Slovakia) will see considerably higher vaccination rates in the upcoming weeks, while markets in Southeast Europe will continue to lag other EU members in the short-term.

​​​Business implications: MNCs should continue to expect soft demand dynamics and a tough operational environment in Q1 2021, while current delays in the vaccination process pose the risk of restriction measures being extended into Q2, which will likely dampen the pace of the recovery. Our base case, however, remains that ramping up vaccination efforts throughout February and March should allow for a resilient recovery starting in Q2. Executives should monitor ongoing efforts on both the EU and national levels, which will be indicative of emerging business opportunities.

Martin Belchev, Senior Analyst for Central and Eastern Europe  ​​​​​
Start a free trial today for further insights

Forecasting consensus expects uneven economic rebound for 2021  

  • The COVID-19 pandemic upended the global economic outlook in 2020 as it caused the worst global recession since WWII. The global forecasting community agrees that this year is going to mark the beginning of the rebound from last year’s contraction.
  • Consensus forecasts suggest that this year the world economy is expected to regain last year’s loss in output. Compounded over 2020 and 2021, the world economy is expected to grow, albeit marginally, by 0.4% per annum.
  • Growth recovery is expected to be sustained into 2022 and 2023 backed by policy stimulus as well as post-pandemic normalization, before trending back to long term average levels in 2024.
  • The strength of the recovery, both in the short- and medium-term, will vary significantly by country and by sector. 

Our view: The details of the consensus data suggest that the recovery is expected to be led by domestic factors, such as consumption and investment, while a recovery in external demand will lag both in terms of timing as well as in strength. This suggests a preference for domestically driven economies. Given that such economies are generally more easily supported by policy stimulus, the consensus data aligns with our in-house view of a K-shaped recovery where we have a strong preference for countries with strong domestic policy support.
​​​Business implications: Firms should prepare for divergent rebounds from the COVID-19 induced recession. For example, B2C companies should continue to expect higher income brackets to show resilient demand. Moreover, domestic demand driven economies with strong fiscal balances will likely come out as winning markets and present better growth opportunities. Externally driven economies are likely to lag and firms should anticipate a more challenging environment.

SY Lee, Senior Analyst of Data Analytics
Start your free trial to access our Global Outlook for 2021 for more details

FrontierView has all the information you need about your market, industry, and company in real-time to power your business decisions. We offer a solution that puts the right information at the right time, at your fingertips. If you would like more insights into your specific markets, click the “Start Free Trial” button on your screen to speak with a dedicated Client Services Manager and receive complimentary access to our offering.