Economic overview
Connecting on the economy
ECONOMIST ROGER MARTIN-FAGG OFFERED SOME LIKELY SCENARIOS FOR THE GLOBAL ECONOMY AND
EVENTS INDUSTRY DURING A RECENT UFI CONNECTS SESSION
lobal association for the
exhibition industry, UFI’s
webinar series, UFI
Connects, have been
offering event professionals a regular
opportunity for exchange of information
and economist Roger Martin-Fagg was
guest speaker at the ‘The Economist’s
View Beyond Covid-19’ session in April
and predicted a strong return for the
global economy provided lockdown can
be ended.
Moderator UFI MD Kai Hattendorf
tested the temperature of the virtual
room, with a poll for the 300 or so
online:
‘What type of economic recovery do you
expect after the Covid-19 pandemic?’
1. Y or V shape (fast in fast out); 2. U
shape (more extended process) or 3. L
shape (recession)?
The results: 10% - Y/V; 68% - U and
22% - L.
Martin-Fagg took issue immediately
with the 68% inclined to think the
U-shaped recovery most likely and
outlined reasons for a V-shape recovery
being most likely. Although his theories
were drawn predominantly from UK
data and referenced mainly Western,
economies, Martin-Fagg offered plenty
of general food for thought.
He noted that differences in
measurement techniques made reaching
firm uniform conclusions problematic,
giving the example that measuring UK
GDP over the next six months using the
‘expenditure’ method would give a figure
representing a drop of around 15%, yet if
one used the yardstick of ‘income’ it
would only drop by 5%.
Western governments were trying to
maintain short-run economic activity, he
pointed out, but much would depend on
how much money there was and how
quickly it got spent.
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CONFERENCE & MEETINGS WORLD
A normal recession, he said, came
when the money supply contracted.
And Martin-Fagg likened money in
this situation to water going through a
pipe – or rather in the coronavirus
context, getting stuck in the pipe.
People could not go out and spend and
central banks were effectively “creating
money out of thin air” for their
governments.
“Around $7 trillion of new money will
enter the global economy over next 18
months,” said Martin-Fagg, “equivalent
to 10% of global GDP flowing into
businesses through wage support and
loans.”
Martin-Fagg was optimistic, however,
that as soon as lockdown is over,
economies would manage to grow by the
end of year. “All we need is for money to
move through, for us to socialise and
shop,” said Martin-Fagg.
The economist then explained that the
Eurozone Purchasing Managers’ Index
had reached its lowest mark ever,
crashing to a figure of just 28. In the
USA it had dropped to 38.
China’s manufacturing actually
rebounded in March, however.
Martin-Fagg ruled out a prolonged
L-shape recession, saying that such a
scenario could only take place in
Western economies when people save
much more money because the value of
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their key asset (usually a house) is falling.
“Prices will stick and that is the key
reason there will not be an L shape,” he
believed.
He did admit that variations in
traditions and age demographics affected
the picture in some countries,
highlighting Italy had more coronavirus
cases and deaths than South Korea.
Casting his gaze into 2021,
Martin-Fagg reminded that, after SARS,
global growth didn’t collapse.
Looking at the events industry, the
economist said there could be a more
pessimistic outcome than for the
economy in general due to its dependence
on international travel.
Questions such as, ‘were delegates
coming from virus-free countries?’
would need to be taken into the equation,
although events dependent on local
markets could be confident of coming
back straight away.
And, in a nod to Asia Pacific, he said
countries in that region would have the
most headroom for fiscal expansion.
He concluded that, over the next six
months, GDP would fall 5-7% in most
countries. But as soon as lockdown is over
next year could see growth of over 2%.
Event organisers, Martin-Fagg said,
needed to consider over the next nine
months questions such as, ‘Do I have
enough people?’ ‘Is my supply chain
organised well enough?’ and ‘Will
inflation take off due to money supply
increase?’.
Visit the www.ufi.
org website for more
details of the UFI
Connects series.