Covid-19 fuels fears of broader role for government in economy


Shortly after Covid-19 became a pandemic, as business activities halted and countless workers lost their jobs, central banks acted quickly and flooded the world with massive amounts of liquidity to prevent the crisis to get out of hand. A year later, as economies begin to recover, the consequences of these unprecedented monetary measures to support the global economy are beginning to be felt.

“In all markets, we are clearly seeing signs of a multi-speed recovery as well as inflationary pressures, potential reliance on monetary stimulus, tax hikes, emerging regulatory risks and questions about financial health real business, ”said advocacy manager Mary Leung. for Asia-Pacific at the CFA Institute.

CFA Institute, a global association of investment professionals, published a report based on the results of a new survey of its members around the world to identify and highlight the critical impacts of the pandemic on financial markets.

The report, Covid-19, a year later, capital markets enter uncharted waters, reflects the point of view of the members and founders of the CFA Institute on the structural consequences of the crisis on the economy. It also discusses the potential socio-economic distortions that may have been caused by the monetary stimulus measures adopted by central banks to deal with the crisis.

According to the survey, a large majority of respondents (global – 65%, APAC – 64%, Hong Kong SAR – 63%) believe that an accommodative monetary policy, combined with constraints on the supply side, will cause inflationary pressures over the next. at three years. However, respondents are very divided on whether inflation will cause central banks to restrict monetary policy accordingly. About 31% (31% in APAC, 29% in Hong Kong) think central banks will switch to a restrictive policy, while 34% (33% in APAC, 34% in Hong Kong) think the opposite.

Meanwhile, 58% of respondents globally (46% in APAC, 45% in Hong Kong) agree that the role of government will expand due to the crisis and that the share of public spending in GDP will structurally increase. and materially, just like taxes. Additionally, 40% (39% in APAC, 36% in Hong Kong) believe that the trend towards sustainable investing is strong and is here to stay.

The survey also found that 44% of those polled (42% in APAC, 45% in Hong Kong) believe the stimulus measures have created a gold mine for the investor class, widening the wealth gap in the country. society.

About 44% (43% in APAC, 40% in Hong Kong) see their region’s economy recovering in the form of a K-shape, an economic course that affects different categories of people, businesses, regions and industries in different ways.

A plurality of respondents believe that stocks in their respective markets (45% globally, 43% in APAC as well as in Hong Kong SAR) and in global developed markets in general (43% globally, 55% in APAC, 51% in Hong Kong) recovered too quickly from the market crash in February-March 2020 and are expected to undergo a correction within one to three years.

“With the authorities ready to do anything to avoid a liquidity crisis in the markets, the economic stimulus triggered to deal with the crisis may well have its own consequences,” said Nick Pollard, managing director for Asia-Pacific at CFA Institute.


Leave A Reply