Weekly Update - 4th June 2021
Next Generation EU
Late Monday evening, the twenty-seven member states of the European Union (EU) validated the process of issuing a common debt from their own resources to finance the economic recovery post-Covid. The representatives of member states met during a European Council and thereby gave the European Commission the green light to implement its "NextGenerationEU" recovery plan. This plan was adopted in July 2020 and backed by the multiannual financial framework 2021-2027 voted in November 2020. In all, a total of €750 billion (bn) allocated to national programs will be granted to EU countries through massive borrowing (split in grants for €390bn and in loans for €360bn).
Under their existing plan, the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, agreed on Tuesday to continue to gradually ease production cuts amid a rebound in demand. The cartel decided to stay on the previously designed path of raising production by 2.1 million barrels per day (b/d) from May to July. The group plans to add back 350,000 b/d in June and 440,000 b/d in July. Saudi Arabia is also gradually adding back 1 million barrels in voluntary cuts it made above and beyond its group commitment. On the day of the announcement, crude oil prices rose 2% to $67.72 per barrel for WTI after jumping by nearly 4%,
reaching its highest level in three years. Brent, the European standard, traded 2.7% higher at $71.17 to close at $70.25 per barrel, its highest price in two years.
OECD economic outlook
As vaccine rollout allows businesses to resume operations, the Organisation for Economic Cooperation and Development (OECD) hiked its economic forecasts. The OECD now thinks that the global economy is set to grow by 5.8% this year and by 4.4% next year, up from 5.6% and 4.0% respectively in its last forecasts released in March. The
global economy has now returned to pre-pandemic levels but remains short of the growth expected prior to the global health crisis.
The U.S. economy is now expected to grow by 6.9% this year, up from a previous forecast of 6.5%, but the 2022 forecast is cut to 3.6%, down from 4% expected earlier in March. Euro area's economic growth expectation was also revised up to 4.3% for 2021 and to 4.4% for 2022 in the report. As for the UK GDP, the OECD forecasts that it will rise by 7.2% in 2021, the fastest growth since 1941, after a 9.8% contraction last year, the worst in almost 300 years