Highlights:
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The impact of the Covid-19 pandemic on the global economy has been profound, especially in emerging, low-income economies with limited health care capacity.
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Trade tensions between the US and China added to market volatility, while the outcome of the November US presidential election remains uncertain.
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A port explosion in Beirut killed at least 135 people and severe flooding in southern China added to the country’s woes, displacing millions from their homes.
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The Reserve Bank of Australia (RBA) kept rates on hold at 0.25% at its August meeting and indicated it will resume purchases of 3-year government bonds.
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Harsher restrictions in Victoria following a spike in Covid-19 cases could cost the Australian economy $9 billion, according to the federal government.
Global economies
Hopes of a V-shaped recovery faded as Covid-19 cases worldwide ticked over 15 million. Policy settings remain incredibly favourable as central banks and governments support economies via monetary easing and fiscal measures. Cyclical indicators such as unemployment figures and PMIs remain weak but are showing signs of improvement as the global economy adapts to the pandemic.
US
The impact of the coronavirus caused US GDP to shrink by an annualised 32.9% in the June quarter (-9.5% quarter-on-quarter), slightly better than the expected 34.1% fall.
Europe
The flash estimate for eurozone June quarter GDP came in as expected, falling 12.1%, making it the largest contraction on record as lockdowns continued to impact global demand.
China
China’s June quarter GDP came in above expectations, with the yearly rate increasing to 3.2% (2.5% expected), following a -6.8% reading in the previous quarter and becoming the first country to report growth since the beginning of the pandemic.
Asia Region
Japan was initially successful in preventing the spread of Covid-19. Cases have been rising recently, with over 40,000 confirmed at the start of August, but to date the economic effects have been less dramatic compared to other regions.
Australia
The Australian government warned that the economy likely shrunk at its fastest pace in recorded history in the June quarter, while the budget deficit will be the biggest since World War II as payments were extended to businesses and job seekers.
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