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William De Vijlder

The economy is picking up – to a limit

As BNP Paribas chief economist William De Vijlder gave the morning keynote of Thursday’s digital Treasury 360° Oslo conference, he shared of positive view of how quickly activity is picking up in recent quarterly figures after the spring’s crisis. Even so, the overall picture was less than cheerful.

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“But I insist on the word ’gradual’,” he said, predicting that it will take until the end of 2022 until GDP is back where it started before the covid-19 crisis.

Estimates show that between 25 and 35 percent of European companies will experience a financing shortfall already by the end of 2020 as they have emptied their working capital and liquidity buffers. Increased indebtedness is already burdening corporate interest coverage ratios. Going forward, there is notable risk that companies will cut down on investment even as their margins pick up; paying back debt could take a higher priority.

“The long shadow of unemployment” will in fact see unemployment rising, rather than subduing, during 2021. A new concept to learn is “prophylactic absenteeism” – consumers staying away from entertainment, hotels and restaurants to avoid infection.

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“This is mainly a sector phenomeneon but it could have an effect on the broader economy as well,” says William De Vijlder.

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