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Global Economy: Deutsche Bank Sewing Has Grim Outlook For Future

Potential for Higher Inflation
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EDITOR NOTE: It will take years for the global economy to reclaim its pre-pandemic levels. Not months, but years. That’s what Deutsche Bank’s CEO said today; echoing an opinion that’s not so far off from most other financial experts. In the US, stimulus measures helped pull us out of the COVID-driven bear market. But how sustainable is it really when the government has to continually print money to prop up the economy? Meanwhile, stimulus funding is being reduced. Everything we just said is not from a pessimistic viewpoint; it’s the most optimistic take on an inherently pessimistic reality.

 The economy will not return to pre-coronavirus levels for a “long time,” the chief executive officer of Deutsche Bank warned Wednesday.

Business activity in the euro zone dropped sharply in the wake of the strict lockdown measures imposed in March, but have somewhat rebounded in recent months following the easing of certain restrictions. The United States has experienced a similar picture.

However, there are concerns that the slight rebound in activity will not last if new lockdowns and social restrictions are implemented once again or, more simply, if there is no vaccine or significant treatment put in place.

“A return to our old economic strength will take much longer than we assume today,” Christian Sewing, CEO of Deutsche Bank, said at the Handelsblatt Banking Summit.

“A lot of companies have to manage to live with reduced sales for quite a long time. We have to deal with an economic situation where we will have a recovery, yes, but only step by step and not in all industries,” Sewing warned.

The pandemic has wreaked havoc on the travel and tourism industry. Some analysts question whether the ongoing summer season is providing just a temporary lifeline to some hotels and other tourism-related businesses.

In addition, governments are planning to reduce some of the stimulus they have provided since the pandemic first hit, which represents a growing risk for many companies and workers.

“The pre-crisis level will be difficult to reach and it will take a long time. This is not going to happen this year and not next year either,” Sewing said, adding that some parts of the economy will only operate at 70% to 90% of its overall capacity. 

He added that as a result of the health emergency, other economic challenges are not being discussed. He mentioned the “dangers of a non-orderly Brexit,” the effect of “low interest rates” and the trade conflict between the United States and China.

“I do not want to be too pessimistic, ladies and gentlemen, I am just describing the current environment,” Sewing told the audience in Frankfurt.

Originally posted on CNBC

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