Coronavirus impact monitor - 15 April 2020 - Deloitte Economics Greenland edition
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Coronavirus impact monitor – 15 April 2020 Deloitte Economics Greenland edition
Real economic impact
Local government introduce aid package to help the Greenlandic economy through the
COVID-19 health crisis
• Between 20 January 2020 and 14 March 2020, the number of global confirmed COVID-19 cases has risen from Greenland statistics1
seven to about 1.8m. In Greenland, the number of confirmed cases was two on 18 March 2020, four on 23 March
2020 and as of 14 April 2020 this figure was 11 out of 941 people tested. Number of
• However, the health crisis has pushed the global and Greenlandic economies into unchartered territory. The people 941
government is signalling that it is doing whatever it takes to prevent a situation where the capacity of the tested
healthcare system is breached. This includes extraordinary measures, and like many other countries Greenland –
especially in Nuuk - is de facto closed down.
Number of
• Right now, the challenge is not so much that consumers are unwilling to spend money: In many cases, consumers
cases 11
are unable to spend money. Figures from Denmark, for instance, show that spending at restaurants and on
transportation is down by some 60-80% in March 2020 compared to the same time last year. Grocery spending, in
contrast, is up by some 20% on average compared to 2019 levels (the spikes in the charts below likely reflect
stock building). Number
• To help the Greenlandic economy through the crisis the Government of Greenland has introduced an aid package
people 11
recovered
including: Postponement of tax payments, compensation to employee retention, compensation for reduced
turnover and state-guaranteed loans.
Dramatic changes in consumer spending patterns in Denmark2
Restaurant spending index Grocery spending index Transportation spending index
120 180 120
(100 = same weekday in 2019)
(100 = same weekday in 2019)
(100 = same weekday in 2019)
160
100 100
140
80 120 80
Index
Index
Index
100
60 60
80
40 60 40
40
20 20
20
0 0 0
0 5 10 15 20 25 30 0 5 10 15 20 25 30 0 5 10 15 20 25 30
Date March 2020 Date March 2020 Date March 2020
Note: 1) As of 14 April 2020, 2) Danske Bank consumer spending data based on transactions with cards and MobilePay
Source: Danske Bank, Deloitte analysis
Coronavirus impact monitor – 15 April 2020 Page 2 Deloitte Economics © 2020Impact on financial markets
European equity markets have recovered some of the initial losses from COVID-19
Equity markets: Sectoral indices in Europe
• The outlook for increased public expenditure and
central bank interventions to ease liquidity strains Major outbreak in Europe
appears to have supported markets in recent weeks.
Sectoral indices indexed to 100
110
• European equity indices suffered material losses
following the COVID-19 outbreak in Europe but have 100
on January 2, 2020
recovered from the bottom reached around mid- 90
March.
80
• Especially the Transport industry, including airlines,
70
was severely affected by the spread of the virus and
related travel bans. The EURO STOXX Transport index 60
is down by some 34% since the end of January 2020, 50
driven by a material decline in volumes.
40
• The European energy sector, including oil and gas 29 Dec 12 Jan 26 Jan 9 Feb 23 Feb 8 Mar 22 Mar 5 Apr 19 Apr
companies, has lost more than 30% since the end of Transport Energy Pharmaceuticals Financial Technology
January 2020. Declining energy prices have applied
downward pressure on energy equities. Interest rates: 10Y Interest rate (swap) and 6M interest
rates (CIBOR)
• Financials, including banks, have also experienced
0.4
value destruction. Market concerns about increased
0.3
credit losses and funding squeezes are likely drivers,
but aid packages and initiatives appear to have 0.2
supported this sector in recent weeks. 0.1
% rates
• Interest rates have risen from the bottom reached 0.0
around 9 March 2020 on the outlook for increased -0.1
public expenditure and central bank interventions. -0.2
-0.3
-0.4
29 Dec 12 Jan 26 Jan 9 Feb 23 Feb 8 Mar 22 Mar 5 Apr 19 Apr
10Y DKK Swap rates 6M CIBOR
Note: 1) All indices are on a European basis: EURO STOXX Transport, Energy, Pharmaceutical, Financials and Technology index
Source: Thomson Reuters Eikon, European Union
Coronavirus impact monitor – 15 April 2020 Page 3 Deloitte Economics © 2020Economic Outlook: Deloitte survey
Severe slowdown of the world economy throughout 2020
• The disruption of the global supply and demand chain and financial markets translates into an adjustment of Economic growth projections
economic growth projections worldwide. According to the IMF’s latest predictions, the global economy is 5.8% 6.0%
expected to contract by 3.0% in 2020 instead of the initially estimated 3.4% growth. 4.7%
3.4%
• In the Euro area, GDP is expected to fall by 7.5% in 2020 compared to the pre-COVID-19 growth estimate of 1.4%
1.9%
1.4%, while in Denmark GDP will contract 6.5% in 2020 in compared to pre-COVID-19 growth estimate of
1.9%
• In the US, four years of continuous employment growth has been lost in only two weeks. During the financial (3.0% )
crisis, the number of new unemployed peaked at 650,000 per week. Now the number is over 6.5 million.
According to Danish Industry, this will lead to a decrease in Danish exports to the US by double-digit billions.
(6.5% )
(7.5% )
• Deloitte’s latest survey among 2,000 colleagues and clients from all over the world on 9 April 2020 reveals World Eurozone Denmark
that the majority believes that the economy will recover at the beginning of 2021 and beyond, but overall we
2020 forecast pre COVID-19
are facing a protracted and severe downturn rather than a short-lived recovery. Revised 2020 forecast post COVID-19
Revised 2021 forecast post COVID-19
Results of Deloitte surveys
What will be the ultimate impact on When do you think activity will rebound in
economic growth of COVID-19? your economy? 67%
78% 80%
75% 36%
39% 40% 40% 39%
58% 54% 24% 35%
46% 30% 31% 28% 31%
42%
23%
25% 17% 17%
20% 23%
4% 2%
0% 0% 0%
Possibly severe but Protracted and severe downturn Q2 2020 Q3 2020 Q4 2020 Q1 2021
short-lived slowdown and beyond
12 March 19 March 26 March 2 April 9 April
Note: 1) Deloitte surveys conducted on 12, 19, 26 March, 2 and 9 April 2020, involving about 2,000 colleagues and clients.
Source: Deloitte surveys, IMF World Economic outlook (October 2019) for pre COVID-19 figures; IMF World Economic Outlook (April 2020) for revised forecasts
Coronavirus impact monitor – 15 April 2020 Page 4 Deloitte Economics © 2020Impact of COVID-19 in Greenland
COVID-19 has caused a lock-down in Greenland as well, impacting several sectors (1/2)
• Nuuk has been locked down to contain the contagion and to shield the Risk profiles of major Activity Work Delivery
already limited healthcare sector in Greenland. sectors and activities level force of goods
• Some of the major sectors in Greenland are set to experience decreased
Trawlers at sea
revenue. The primary sources of risk are 1) decreased activity level due to
forced lock-down, 2) ability to get the necessary work force to Greenland
Fishery
Near shore fishing
and 3) delivery of goods. Research for minerals could be set back due to
situation on the financial markets. Industrial buyers/factories
• As per 20 March 2020, all passenger transport by air and sea in and out of
Greenland, as well as domestically, has been suspended until April 30 rd Farming/agriculture
2020. Goods transportation by air and sea will continue to ensure supplies,
along with transportation, which is critical to society. It is estimated that Mining activities
material
flight departures will decrease more than 75% as a consequence of the
Ice/water
Raw
lock-down1.
• Fishery is the largest and most important sector in Greenland. Although Exploration activities
transportation of goods in Europe is still open, demand for especially
shrimps might decrease for a longer period due to the global crisis. The Site operators/facilities
industrial buyers and factories might be forced to close down impacting the
activity negatively. There is granted a special permit to secure the staffing Aviation / Airports
onboard the trawlers.
Hotels
Leisure
• The raw material sector in Greenland is impacted as the exploration
activities could decrease as a consequence of lower investment levels within Restaurants and café´s
the sector. The sector is furthermore impacted as foreign specialists and
employees are unable to travel to Greenland decreasing the mineral and Tours and tourists events
metal mines activities as well as the exploration activities.
Bus/taxies (road/water)
• Specifically, the ban on gathering and travel will impact the leisure sector.
The high season has not yet started in Greenland. However, if the Architects / Engineers
conditions persist over the summer, the sector will be significantly impacted Construction
due to lower activity. The sector has already been forced to close as a Entrepreneurs
consequence of the lock-down.
Building material providers
• The construction industry is primarily threatened in terms of replacement of
the work force as the construction workers cannot travel to Greenland. Until Facility and security services
now this has not caused larger challenges.
Note: 1) Deloitte analysis
Coronavirus impact monitor – 15 April 2020 Page 5 Deloitte Economics © 2020Impact of COVID-19 in Greenland
COVID-19 has caused a lock-down in Greenland as well, impacting several sectors (2/2)
• The retail industry is impacted by the lock-down in term of the physical Risk profiles of major Activity Work Delivery
stores being forced to close. The grocery stores, including food and non- sectors and activities level force of goods
food products, will remain open.
• The telco industry is not expected to be significantly impacted other than Groceries (food and non-food)
operators and consultants with the industry being unable to facilitate
Clothes, fashion and self-care
Retail
meetings in person.
• The liberal industry includes financial organisations, advisers and personal Long-term consumer goods
care facilities. The financial organisations and advisors are not expected to
be impacted significantly except for the inability to facilitate meetings in Personal transport vehicles
person. The personal care facilities as e.g. hairdressers are impacted as
these are forced to close due to the lock-down. Tele infrastructure
Telco
• The entertainment industry, including among others theatres, music Operators / consultants
performances and fitness centres are significantly impacted as the lock-
down has forced these to close as well. Developers / platforms
Financial organisations
industry
Liberal
Advisers
• The city development projects as well as other commercial development
projects might be impacted due to higher level of uncertainty causing Personal care providers
investors to hesitate directly impacting the external financing opportunities.
Theatres, festival and culture
• All sectors faces the risk of a slowdown due to lack of employees if the
Entertain-
breakout spreads Music and performances
ment
• Technical areas faces the risk of a machinery breakdown, which can´t be
Fitness and sport facilities
repaired due to lack of spareparts and specialist to repair them.
• Many sectors faces a risk due to chain-reactions. If i.e. fishing factories are Sport event organisers
locked down, there will be no places to sell the fish for near coast vessels
Note; the analysis are not to be considered a complete list – and the risk
profile can change rapidly due to changes in the covid-19 situation.
Note: 1) Deloitte analysis
Coronavirus impact monitor – 15 April 2020 Page 6 Deloitte Economics © 2020Key messages
The global economic slowdown is set to hit the Greenlandic economy, but public support
and alignment with the private sector will ease the long-lasting impact
• In Greenland, the number of confirmed cases was 14. April 2020 11 out of 941 people tested. The 11 persons have all recovered. Until now none have
needed intensive care.
• COVID-19 has caused severe damage on the world economy. The equity markets have recovered some of the initial losses from the outbreak of COVID-
19. Supply chain disruptions and negative demand shocks have spread from China to the rest of the world.
• In Greenland, especially leisure, including aviation, hotels and restaurants, and the entertainment industry have already suffered major losses due to
the lock-down of the economy. In the construction sector, intelligence suggests that staffing is not really an issue. Similarly, in the fishing sector,
agreements have been made around crew shifting, so staffing does not appear to be a real issue here either. On the other side, in the liberal
professions, activity has been severely impacted. For instance, consulting has taken a hit as physical presence (e.g. workshops) is key to delivery of
services.
• The aid packages in Greenland have been introduced. They are based on the Danish model with a budget of around DKK 250m. In addition, delayed tax
payments have been introduced. The unemployment figures for March were not as bad as many expected with a smaller increase to around 40-50
unemployed).
• According to a policy brief from the Economic Council of Greenland there is a threat of a fall in GDP at minus 3 percent in best case and minus 7,4
percent in worst case. If the GDP is estimated to 20 billion d.kr., that means a loss in values between 0,6 and 1,5 billion d.kr.. That must be expected
to have significant effect on tax income.
• Deloitte Economics will continue monitoring the impact of the Coronavirus in Denmark, Greenland and globally (here).
For questions on the contents of this report, please contact:
Majbritt Skov Bo Colbe Rikke Beckmann Danielsen
Director, Head of Deloitte Economics Partner Partner
Mobile: +45 30 93 54 71 Mobile: +299 56 27 70 Mobile: +45 30 93 56 92
maskov@deloitte.dk bcolbe@deloitte.dk rdanielsen@deloitte.dk
Note: Disclaimer: The information in this document is intended for knowledge sharing only.
Coronavirus impact monitor – 15 April 2020 Page 7 Deloitte Economics © 2020Appendix Coronavirus impact monitor – 15 April 2020 Page 8 Deloitte Economics © 2020
Impact on financial markets
Equity market volatility at highest level since the global financial crisis
Eurozone PMI Composite Index: Business sentiment
• Due to the coronavirus outbreak, the Eurozone 70
economy suffered an unprecedented collapse in
65
business activity in March 2020, as the coronavirus
outbreak intensified. 60
HIS Eurozone Index
55
• There is usually a relatively good link between economic
growth and this measure of business sentiment: the 50
reading is indicative of GDP slumping at a quarterly rate 45
of around 2%.
40
35
30
25
Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Jan 2018 Jan 2020
Nordic M&A activity by quarter
• M&A activity across the Nordics declined in 2019. 500 1,400
1,269
1,221
• Activity in Q1 2020 reached its lowest quarterly level 450 1,156 1,174 1,155
1,087 1,200
Total annual deal volume
observed since 2014. 400
# of deals in Denmark
1,011 983
912 919 940 340 346 348 1,000
350
309 309 311
294 282
300 278 279
257 255 264 800
245 246 240 243
250 230 237 236
212 206 203
191 600
200 168
150 400
100
200
50
0 0
2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Annual deal volume Deal volume Nordics
Source: Markit Economics, Thomson Reuters Eikon, Mergermarket
Coronavirus impact monitor – 15 April 2020 Page 9 Deloitte Economics © 2020This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities. About Deloitte Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com. Deloitte Touche Tohmatsu Limited Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more. © 2020 Deloitte Statsautoriseret Revisionspartnerselskab. Member of Deloitte Touche Tohmatsu Limited.
You can also read
