Taplow partners across the globe have combined to bring you up todate local and regional economic and business insights.

Key Finding:
Companies:
With the announcements of successful vaccine trials, companies are planning for an upturn in business in 2021. Although the rollout of vaccines is dependant on governments having initially pre-ordered the successful vaccines, there is still concern about certain regions being able to afford or effectively distribute the vaccine to allow their economies to bounce back.

Executives:
Local focus is the key to companies’ executives understanding the impact on their businesses through the end of the year and into Q1 of 2021.Knowledge of what is happening on the ground enables successful strategies being rolled out.

Employees:
Uncertainty of Covid regulations coupled with fast changing strategies is causing stress within the workforce. Employees are often on the front line of implementation of strategies and require clear and concise communication.

AFRICA
As Sub-Saharan African countries have managed to keep the COVID-19 virus (coronavirus) under control with relatively low number of cases, the pandemic continues to take a toll on African lives and economies. Economic activity is projected to decline by 3.3% in 2020, confirming the region’s first recession in 25 years. The substantial downturn in economic activity will cost the region at least $115 billion in output losses this year, in part caused by lower domestic consumption and investment brought on by containment measures to slow the spread of the coronavirus. Below are key points from our partners in each country.

South Africa
South Africa’s economy is expected to bounce back in the third quarter of the year – with finance group BNP Paribas even expecting things will work out better than the South African Reserve Bank expects. Q4 growth performance is now also more subdued at +1% q/q, and indicates an economy, which still looks likely to contract 8% in 2020.

After this year’s projected contraction at the hands of Covid-19, the economy is seen to be rebounding in 2021 as domestic and foreign demand revive. That said, high unemployment and persistent electricity shortages are likely to weigh on growth, while frail fiscal metrics and a ballooning public debt stock pose additional risks. Focus economics panellists see the economy expanding 3.6% in 2021, which is down 0.1 percentage points from last month’s forecast, and 2.5% in 2022.

ASIA
The region as a whole is expected to grow by only 0.9 percent in 2020, the lowest rate since 1967. While China is forecasted to grow by 2.0 percent in 2020 – boosted by government spending, strong exports, and a low rate of new COVID-19 infections since March, but checked by slow domestic consumption – the rest of the EAP region is projected to contract by 3.5 percent. Below are key points from our partners in numerous countries in the region.

Australia
In Australia, conditions continue to improve across the nation from a COVID-19 pandemic perspective and from a markets and consumer sentiment perspective. Consumer sentiment jumped a further 2.5% in November, leaving the headline index at its highest level since late 2013. High frequency payrolls and housing data were also robust and consensus forecasts for Australian GDP growth in 2021 are now starting to move higher. (Source: Bloomberg and JBWere. Sally Auld Chief Investment Officer, JB Were.) Past performance is not a reliable indicator of future performance.

Domestic travel options continue to open up in Australia to all regions without quarantine restrictions and the frequency of air travel is increasing. The return of office workers to Central Business Districts is being staged in most major cities with strict guidelines for use of public transport, social distancing and hygiene protocols including masks and sanitiser use. International returns of Australian citizens are also being increased with Victoria likely to once again open its international gateway in December adding to the other gateways already open.

India
India's IT and business services market is expected to increase by 5.4% annually to reach US$ 13 billion, research firm IDC said.

A new study reported that in 2020 mobile phone exports in India are expected to record the highest shipments ever of US$1.5 billion by value, out of which 98% will be smartphones.

Flipkart Group, including Myntra, dominated as India’s online retailers clocked a 65% jump in gross merchandise value (GMV) during festive season sales this year. This year’s festive sales saw 88% customer growth from last year, as close to 40 million shoppers from tier-2 and beyond cities tapped e-commerce platforms

The Internal Working Group of RBI (Reserve Bank of India) has suggested opening banking systems to large Corporate & Industrial Houses, as promoters of Private Banks. This report by IWG has led to a lot of discussion in the market, with as many critics as well as supporters.

Digital Payments: Approximately US$270.7 billion in transactions worth US$66.6 billion are projected to move from cash to cards and digital payments in India by 2023 and expand further to US$856.6 billion by 2030, Accenture said on Tuesday.

India may attract US$120-160 billion per year of foreign direct investment (FDI) by 2025, leading to an increase in the ratio of FDI to GDP from 3-4% to less than 2%, CII and EY researchers reported. Over the past 10 years, the country has seen GDP rise 6.8%, with FDI increasing to GDP at 1.8%. It reported that in terms of attractiveness, investors ranked India third, at least 80% have plans to invest in India in the next two to three years, and nearly 25% reported investments worth more than US$ 500 million, The Economic Times reported.

Singapore
Singapore’s economy is expected to shrink between 6 per cent and 6.5 per cent this year. However, amid the COVID-19 pandemic, Singapore managed to secure S$13 billion worth of fixed asset investment commitments in the first four months of 2020. That was among the highest in recent years and reflected businesses’ confidence in Singapore’s “high levels of connectivity, openness, and brand of trust”, according to the latest public sector report released.

Singapore also continued to be highly regarded as a place to do business. This year, the country ranked second in the World Bank’s Ease of Doing Business Index, after consistently placing in the top three for the past 14 years. Singapore was ranked among the world’s most competitive economies by the World Economic Forum in 2019, and by the International Institute for Management Development (IIMD) in 2020. This year, it was also the only Asian country in the top 10 of the IIMD’s world talent ranking.

Streamlined regulations and improved government to business (G2B) services make it easy to start and grow a business, as well as pursue innovation. It takes only 1.5 days to start a business in Singapore.

Companies and banks will soon get more support to obtain and develop green and sustainable financing under a new scheme by the Monetary Authority of Singapore (MAS).
The Green and Sustainability-Linked Loan Grant Scheme (GSLS), announced on Tuesday (Nov 24), will take effect from Jan 1 next year. Describing the GSLS as "the first of its kind globally",MAS said in a media release that it seeks to support companies of all sizes to obtain green and sustainable financing.

Under the scheme, MAS will defray up to S$100,000 of the expenses that companies incur to validate the green and sustainability credentials of a loan. This includes expenses to engage independent sustainability assessment and advisory service providers to develop green and sustainability frameworks and targets, obtain external reviews and report on the sustainability impact of a loan.It will defray up to 60 per cent of expenses, capped at S$120,000, incurred by banks to engage independent sustainability assessment and advisory service providers, obtain external reviews and report on the allocated proceeds of loans originated under the framework.
 
New Zealand
Tourism exports normally account for around 5% of GDP, and the halt on tourist inflows since March has been a significant drag on earnings and employment in sectors like accommodation and hospitality. In contrast, outside of the travel and tourism sectors, much of the ground lost earlier in the year has already been recovered, with many parts of the domestic economy rebounding faster than expected after the lockdown. At the head of the pack, businesses linked to the building industry are reporting strong demand. There have also been lifts in manufacturing activity (including exports) and gains in the retail sector. Against this backdrop and on a positive note, there seems to be a rise in the number of businesses who are planning to take on new staff.

Covid-related support spending is now winding down, but there will be ongoing increases in general Government spending and huge infrastructure investment over the coming years. There is a public appetite for fiscal spending to tackle a wide range of social concerns, including child poverty, access to housing, and the provision of both health and education services.

Helping to boost households’ spending appetites has been the roaring strength of the housing market, which has defied expectations for a significant downturn in the wake of the Covid-19 outbreak. When the economy first went into lockdown most of New Zealand’s major banks forecasted that house prices would initially fall by up to 7% and would later shoot higher in response to low interest rates. However, what occurred was a decline of only 2% followed by an earlier and bigger boom, with prices now up a whopping 14% over the past year.

EUROPE
The region’s predicted “2nd wave” of Covid19 is here as the winter starts. A number of key countries have announced either complete lockdown or regional lockdowns that will undoubtedly weaken the return to economic growth, The Gross Domestic Product (GDP) in European Union contracted 4.30 percent in the third quarter of 2020 over the same quarter of the previous year. Below are key points from our partners in numerous countries in the region.

France
Most of the macroeconomic figures for the third quarter of 2020 are now available. They retrace, with those of the second quarter, an unprecedented sequence in which a large part of the economy came to a standstill before starting up again. The rebound was strong. The French GDP grew by 18.2% in the third quarter compared with the second, bringing the year-on-year change to -4.3% (compared with -18.9% in the previous quarter). This major swing took place over a fairly short period of time, i.e. the bulk of the rebound took place in May and June, even before the start of the third quarter. It was encouraged by an economic policy aimed, via the increase in public debt, at preserving as far as possible the productive fabric and household incomes. The partial activity scheme has allowed employment to fall much less than the volume of paid work since last March.

The second wave of the pandemic and the 2nd lockdown of the population are nevertheless thwarting this rebound and changing the temporality of the crisis. The contraction of private sector activity in France worsened in November as the French government tightened containment measures to stem the spread of the Covid-19 epidemic, according to preliminary data released by IHS Markit.

France's composite PMI index (i.e. Purchasing Managers’ Index) fell to 39.9 in November, its lowest level in six months, from 47.5 in October. A figure above 50 indicates an expansion of activity compared to the previous month, while a figure below 50 indicates a decline. In detail, the PMI index for the services sector fell to 38 in November, its lowest level in six months, after 46.5 in October. The PMI index for the manufacturing sector also fell to 49.1, its lowest level in six months as well, after 51.3 in October.

Beyond the contraction in GDP now expected in the fourth quarter, it is now quite likely that the health and economic situations will continue to be linked, for at least the first half of 2021. The expectations of economic players are therefore adapting accordingly. The prospect of a vaccine, if it materialises, suggests however that the horizon for the end of the health crisis may be drawing nearer.

Finland
GDP is up 2.5% in Q3 after 4.5% down in the previous quarter so there is some financial recovery in place. However, the new restrictions and second wave of Covid-19 will have its effect. No major drops in employment rate yet.

Covid-19 situation in Finland is still among the best in Europe but getting worse and we are applying new restrictions. In Finland, people are rather compliant towards authorities and regulations which can be seen in wearing masks and trying to keep social distance.

Even though the pandemic situation is as serious or even worse than in spring, there is a big threshold in closing the restaurants or gyms etc. Success of the winter season in Lapland is crucial for the whole travel industry and is now based on domestic travel only. National airline company Finnair is relying heavily on owners’ help to get through the pandemic.

Germany
After the corona recession, the economic experts are expecting significant growth again in the coming year (GDP +3.7%). For 2020, they expect a decrease of only 5.1%. However, due to the increasing number of infections, experts still see many risks. The prospect of a corona vaccine improves the chances for a faster economic recovery.

GDP for Germany Q2, -10.1% compared to Q1; Q3, +8.2% compared to Q2 (-4.1% compared to Q3 2019). The unemployment rate fell from September to October by 0.2% to 6.0%. The use of short-time work continues to decline. However, there are still clear signs of the first wave of the corona pandemic on the labour market.

Business Advisory – Market Entry and Growth Opportunities for Tech-SMEs
We stand for Strategic Consulting and Executive Search. Together with selected experts we offer a holistic approach tailored to our clients' international strategy and growth opportunities.

In Q4 2019 Taplow (Germany) started a new initiative focusing on the fast-developing sector of climate-relevant and environmental technologies and is now profiting from initial consulting projects.

According to the ideas of the federal states, the protection rules in force until the end of November are to be extended for the time being until December 20 and in some cases tightened. For example, private meetings will be restricted to five persons from a maximum of two households. However, this is to be relaxed from Christmas to New Year.

Norway
Business in Norway is still improving halfway into Q4. Gross National Product for the year is however expected to be down between 5 and 8%. Current unemployment is about 6.6%, up from 3.1% in 2019.

‘Semi-lock-down’ - Most businesses go as usual, but large corporations are encouraged to let as many as possible to work from home. Restaurants and bars are not able to serve alcohol after 23:59, and not allowed to let new guests in after 22:00
Generally, travel and tourism is hurt badly. Norwegian Airline, with almost 200 aircrafts and 15,000 employees has filed ‘chapter11’. Elementary Schools are functioning as usual. High-Schools are following one week on, and one week off campus routine.

Russia
The Russian government approved the increase of income tax to 15% on annual salaries larger than RUB5 million. Before, the income tax was only 13% on all wages regardless of income level.

The government prolonged the pandemic regime until January 1st, 2022. For businesses, it means that all extended sanitary norms will continue to be obligatory - extra cleaning and disinfection, providing employees with masks, gloves, and sanitizers all next year. Therefore, we can assume that instead many companies will keep the remote working regime or a combination of home and office work. In Moscow a minimum of 30% of employees must work from home until January 15th, 2021, and companies try to rotate them.

The Russian retail sector has experienced a very heterogeneous development during 2020. Smaller stores, malls and local fashion retailers faced a high decrease in their sales volumes. At the same time, online retail is booming, and hypermarkets are reporting a record year in their sales and number of visitors.

This development is not only related to lockdowns but mainly to the changing consumer behaviour during the pandemic. Consumers prefer to visit fewer stores but with bigger space, to keep distances and buy all necessities in one place.

Another remarkable development we can see in the HORECA and tourism industry. These sectors have been hit hard around Russia, except for the Krasnodar Region, particularly the city of Sochi, which had seen higher numbers of visitors in summer than during the 2014 Olympics and tour bookings increased by 121% compared to last year. Yet, increased numbers of visitors resulted in increasing coronavirus infections and now during the winter months occupation of hotels and resorts is at only 68% of their capacity.

An IMF statement says that Russia’s strong fiscal, monetary, and macro-prudential response to the crisis helped put a floor under the downturn and fostered a stronger-than-projected rebound of third-quarter GDP. IMF experts project the Russian economy to contract by about 4% this year, and to expand by some 2.5% in 2021, assuming the COVID-19 situation gradually normalises.

UK
The UK economy recovered in Q3 2020 with its largest ever increase in GDP. UK GDP grew
by 15.5% in Quarter 3 (Jul to Sep) 2020. In September, monthly GDP was 8.2% lower than the levels seen in February 2020, before the full impact of the coronavirus pandemic.

Q4 will see a contraction due to the national 1-month lockdown that ends on December 2nd and will be replaced by a severe 3-tier system that will see 99% of the UK citizens having restrictions imposed on them.

January 1st 2021 sees the Brexit negotiating period coming to an end. Although the EU and UK governments are still negotiating and say a Brexit trade deal is close, timeframes to conclude matters keep shifting and businesses are planning for a “no deal” outcome that would see the UK trading in Europe under WTO rules, but businesses still want and hope for a trade deal to be signed in December.

The services sector remains 8.8% lower than the level in February 2020, before the main impacts of the coronavirus were seen. The production sector remains 5.6% lower than the level in February 2020, before the main impacts of the coronavirus were seen.

AMERICAS
The Americas and particularly regions in the USA are continuing to see uncertainty of the pandemic and elections also created economic stagnation. Although the USA continues to show economic recovery, it is showing signs of increasing infection rates and uncertainty about how countries tackle the issue. Below are key points from our partners in numerous countries in the region.

South America
The continent is dealing with the pandemic from a weak economic base. Countries are adopting a variety of measures, but many countries are unable to effectively support businesses and this will no doubt lead to an increase in unemployment.

Brazil
Brazil slipped into recession in the second quarter of 2020 as the spread of COVID-19 across the country not only weighed on economic activity but also people’s worries about contracting the virus, social distancing measures, and a deterioration in the labour market affected consumer spending in Q2. The pandemic and its economic impact so far have also added to the uncertainty for businesses that have cut down on investment spending. While fiscal stimulus and monetary easing have aided a nascent economic recovery in Q3, it is too early to say whether there will be any swift upward movement in growth.

The economy contracted for the second successive quarter in Q2 2020 as the spread of COVID-19 hit consumer spending and business investment. Real GDP fell by 9.7% in the second quarter compared to the previous one with domestic demand declining by 12.7%. Compared to a year ago, real GDP was down 11.4% in Q2. Monthly data on key indicators suggest that a recovery is currently underway. Manufacturing, for example, has been recovering after a sharp contraction in April and May.

Canada
Canada's economic outlook for 2020 is improving slightly because of growth in the real estate market, residential investment, and household consumption, although a number of factors that contributed to the 2019 slowdown remain. As a result of the COVID-19 (coronavirus) pandemic, the gross domestic product (GDP) of Canada is projected to decline 5.6% in 2020.

The business index represents the most accurate measure of business confidence in Canada. More specifically, a value of 0.0 indicates completely neutral business sentiment, with lower and higher values respectively corresponding to negative and positive perceptions of the business environment in Canada. In 2020, the index is projected to have a value of -2.3.

This index considers a variety of operating conditions for businesses, including business activity, pressures on production capacity, price trends and credit conditions. In 2020, the index is projected to decline a staggering 8,427.3% as coronavirus cases are once again on the rise in Canada, thus reflecting widespread negative business confidence as the resumption of normal business operations may be delayed further.

USA
Annual US GDP is projected to decline 4.4% in 2020 due to the adverse economic effects of the COVID-19 pandemic. This would be the first decline since 2009 and the worst decline since 1946. Even though a coronavirus vaccine is expected in the first half of 2021, the economy will likely take time to recover to pre-pandemic levels and uncertainty with consumer behaviour will likely remain.

Despite continuing economic concerns and the reluctance of our President to accept the outcome of the election, the US business community remains optimistic about growth as the vaccines are apparently about to be distributed in the US market. Despite the obvious loss in the election, President Trump continues to foster conspiracy theories and is trying to influence the “Electors” from each state to vote for him rather than vote the results of the vote in their state. We have not seen such an effort previously, but it is doubtful the courts, even the judges selected by the current administration will support that notion.

We hope that you, your family, and work colleagues continue to stay healthy and safe. We at The Taplow Group are here to support you and your business through this crisis. We will be back with another update soon.