Three mechanisms or risks explain the low-growth profile that economists at Natixis believe the recovery will take after the corona crisis.
Key quotes
“We believe the profile that GDP will follow after the crisis will be V-shaped, with a somewhat flatter right-hand line of the V.”
“The collapse in corporate revenues in a recession leads companies to run up debt. This increase in debt can then curb corporate investment for a long period.”
“The risk that governments, whose public debt has increased sharply during the recession , may want to reduce it and adopt a more restrictive fiscal policy too soon after the crisis.”
“The increase in corporate debt justifies a rise in companies’ borrowing costs. This increase in borrowing costs stems not only from a rise in risk premia at all rating levels but also from the fact that the average rating of companies is lower.”
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