Our annual ranking of the World Best Banks coincides every year with the release of year-end statements for most of these banks. This year, those annual reports delivered some surprising results, particularly in advanced economies: In an otherwise very tough year for the world economy, the banks did relatively well for themselves and their shareholders. The exceptions are few and in most cases the result of unique problems or scandals. The analysts and economists, it turns out, were too pessimistic.
The reasons for the banking sector’s general good news are several: intense capital markets activity, tied to low interest rates worldwide, and particularly robust M&A; government support through the pandemic to ensure the banks continued lending to prop up business; their role as pass-throughs for support that central banks provide national economies. These features of the year 2020 ended up benefiting financial institutions.
As we went to press, two top economic leaders in the United States Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen were reassuring Congress that massive economic and fiscal stimulus would not generate inflation in the US. Or, more precisely, that they have still strong tools adequate to the task of monitoring and eventually containing price pressures.
That these two would bring such a message is not surprising, but it coincides with the expectation of massive economic rebound in the US potential for soaring growth levels similar to China’s. If that happens, it will be the first time in many years, and it will be the result of an enormous economic stimulus after a deep pandemic-induced recession. In the meantime, corporate entities around the world are still trying to take advantage of this economic climate, and locking down funding for the future while rates remain relatively low.
The Asian Century, the subject of our cover story this month, is certainly not just the result of the Covid-19 pandemic. But it is quite clear that the handling of the global health crisis has generated many more “winners” among Asian countries than in the rest of the world. Asia’s growth and its increasing world leadership in manufacturing have given the region a clear lead as the engine of growth for the rest of the world, and the last year has reinforced this position.
For example, Luca Paolini & Patrick Zweifel, chief strategist and chief economist, respectively, of Pictet Asset Management, recently wrote: “A year after the Covid-19 outbreak triggered widespread social and economic upheaval, Asia is emerging out of the crisis stronger and with greater influence on the world stage, pulling the globe’s economic center of gravity steadily to the East.”
What to do about the new coronavirus strains? Could hypercontagious variants of the virus derail the nascent global economic recovery?
The IMF recently revised its World Economic Outlook acknowledging all the risks (including the effects of lockdowns), and raised its forecast for worldwide growth this year to 5.5%, after a drop of 3.5% last year, with peaks at 11.5% in India and 8.1% in China, and 8% growth in global trade. The economic rebound, according to MUFG rates strategist John Herrmann, has strong tailwinds.
On the other hand, he notes, those new Covid strains are strong headwinds. And what about the vaccination rate slow in most of Europe and North America, and even worse in many emerging economies?
This is our last editorial of 2020 a very turbulent and dramatic year around the world. The Covid-19 pandemic has affected is still affecting all world economies, and the impacts are still being assessed. Covid-19 is the top item on the agenda of President-elect Joe Biden in the US, as it is for most world leaders, for 2021. Successful vaccination is the biggest variable in every future scenario.
This year’s special Outstanding Crisis Leadership feature celebrates companies and financial institutions that excelled in response to the pandemic. Our cover story on corporate reputation an increasingly important intangible asset talks about how crisis response impacts public perception. This issue also presents our annual private banking and digital bank awards, where vitality and creativity were stimulated by the pandemic.