Important Links

Is Policy Enough to Bridge Over Economic Shock?

30 March 2020EconomicsCovid-19

According to Bloomberg, as of 29 March, there are now more than 713,000 confirmed cases in 177 countries. US has overtaken China as having the most cases, with more than 138,000 cases. Citi analysts see the health crisis as poised for greater impact ahead. Cases in a variety of Western cities are following the lagged path of Italy. Similarly, some cities in Asia and even the Southern Hemisphere are seeing acceleration. At current rates of growth, the virus may hit its peak global exposure by late May.

Policymakers are taking extreme and unprecedented steps to limit the disruption’s long-term effects on economic viability. In the US, a US$2trn fiscal package (9.2% of GDP) with about US$1.2trn (5.5% of GDP) in direct stimulus was approved by the Congress, including significant increases for unemployment insurance benefits. The package also gives the Federal Reserve the ability to lever 10-to-1 new US$454bln Treasury equity capital to make loans through existing facilities and a new "Main Street Lending" program. The Federal Reserve has also committed to purchasing Treasury securities and agency mortgage-backed securities "in the amounts needed" to support smooth market functioning and effective transmission of monetary policy. The first time that global leaders have publicly pledge to act on a coordinate basis, the G-20 group announced to inject over $5trn into the global economy and committed to do "whatever it takes".

Is Policy Enough to Bridge Over Economic Shock?

Citi analysts expect the largest decline in global GDP on record in Q1 2020, given the severity of economic contraction catalyzed by COVID-19. New country and city-level shutdowns are still expected ahead. China's gradual re-emergence from its shutdown offers glimmers of hope as to what could be a short contraction for the world economy in 1H. However 25% of US and European workers may become idle in coming months suggesting a potentially even larger decline in GDP than China, which likely shrank 5% YoY in Q1.

On the other side, the discrete nature of the health pandemic and swiftly building government policy response argues for optimism beyond the immediate period. Rapid growth rates from depressed levels can be expected if policymakers succeed in bridging over the period of collapsed demand.

If policymakers are able to compress a major economic shock into a relatively short period, high levels of financial market volatility are expected for the foreseeable future. This means assets may be whipsawed by the collapse and recovery within the coming few months. Amid large daily market movements, Citi analysts prefer diversified long-term portfolios.

Our recent research

Implications of a Deteriorating US-China Relationship

Just as the world is straining to see the first light of dawn from this crisis, the conflict between the US and China was reignited. In the near term, there is likely to be more negative impact from trade conflict, as the excitement of initial recovery fades, and as economic tensions escalate to sovereign.

Find out more

Asia PacEmerging MarketsEquities

Fed Support for Fixed Income Eases Liquidity Concerns

The US Federal Reserve's purchases of corporate bond ETFs alleviates liquidity concerns that created sharp price declines during March-April sell-off.

Find out more


A Likely Slower Grind Higher for Gold

Citi analysts remain medium-term bullish on gold, but see a likely slower grind higher, expecting 2020’s prices to average US$1,680/oz.

Find out more


Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.