“Germany’s Deficit Highest in 30 years…”

Source: Reuters

Germany’s public sector deficit reached €189.2 billion in 2020 due to the coronavirus pandemic.  This was the first deficit since 2013 and the highest budget shortfall since the German reunification three decades ago, according to the Statistics Office. The Statistics Office further added that public spending climbed 12.1% to €1.7 trillion in 2020 as the government was engaged to offset the impact of months of lockdown, while tax collection dropped 3.5% to €1.5 trillion.  From his end, the German Finance Minister, Olaf Scholz, last month promised to do whatever was needed to enable Germany to find the way out of the economic slump induced by the coronavirus.  The pandemic so far has claimed more than 77,000 lives in Germany and damaged the country’s economy even though it has proven to be more resilient than many have expected, partly due to the continued strong export demand from China.   According to the Ifo Institute on Wednesday, the number of people on reduced hours declined last month amid the industrial sector which is benefiting from robust exports. 

Eurozone Business Activity

A survey on Wednesday showed that Eurozone business activity bounced back to growth last month amid record expansion in manufacturing.  It also showed that the service industry is coping better than expected with the new lockdowns. The IHS market’s purchasing Managers’ index (PMI) rose to 49.6 in March from February’s 45.7.  This is just slight away from the 50 mark that separates growth from contraction.  A composite PMI that combines manufacturing and services and is seen as a good gauge of economic health rose to 53.2 from 48.8.  Germany’s private sector experienced growth that accelerated to its highest level in more than three years while a slowdown in France’s service sector eased despite more stringent COVID-19 restrictions. 

FED Minutes on Wednesday

According to the FED minutes of the latest policy meeting released on Wednesday, Fed officials remain wary about the ongoing risks of the coronavirus pandemic and are committed to bolstering the economy until its recovery is more secure.  The minutes from the 16th-17th meeting said that with their forecasts projecting the strongest run of U.S. economic growth in nearly 40 years, “participants agreed that the economy remained far from the (Fed’s) longer-run goals and that the path ahead remained highly uncertain.” “Participants noted that it would likely be some time,” before conditions improved enough for the central bank to consider reducing its current level of support. Whilst labour markets were improving, they remained impacted by the pandemic. The minutes noted that inflation would pick up but likely subside next year. A recent jump in U.S. Treasury yields was “generally viewed … as reflecting the improved economic outlook.”

US Job Openings

The Labour Department’s monthly Job Openings and Labour Turnover Survey (JOLTS report), on Tuesday was the latest indication that the labour market in the US had turned the corner after shedding jobs in December due to a new wave of COVID-19 infections and depleted government relief.  Job openings which is a measure of labour demand, increased by 268,000 to result in 7.4 million as of the last day of February. That was the highest level since January 2019 and pushed job openings 5.1% above their pre-pandemic level.  The second straight monthly increase in vacancies lifted the jobs openings rate to a record 4.9% from 4.7% in January.  Meanwhile, there were an additional 233,000 job openings in the health care and social assistance industry.  Vacancies in the accommodation and food services sector, the industries badly hit by the pandemic increased by 104,000 jobs.  Meanwhile, vacancies decreased in state and local government education as well as educational services and information.  The labour market is being boosted by an acceleration in the pace of COVID-19 vaccinations and $1.9 trillion pandemic relief package recently passed by the White House.

US Trade Deficit

The US trade deficit widened to a record high in February as economic activity rebounded more quickly and could remain high this year amid massive fiscal stimulus that are expected to spur growth.  On Wednesday, the Commerce Department said that the trade gap increased 4.8% to a record $71.1 billion in February. 

Agreement to boost the resources of the International Monetary Fund

A draft communique showed that the world’s financial leaders will agree on Wednesday to boost the resources of the International Monetary Fund by $650 billion to be better equipped to help vulnerable countries deal with the impact of the COVID-19 pandemic.  The draft which is to be signed by financial ministers and central bank governors of the G20, also returned to pledge and fight protectionism in world trade.  The reference had been dropped since March 2016 under the administration of US President Donald Trump. The draft also include that the G20 leaders shall also agree to extend for a final time the debt servicing suspension for the most vulnerable countries until the end of 2021. 

IMF raise most Gulf Countries’ economic growth forecasts

The International Monetary Fund expects most of the Gulf economies to recover this year at a faster pace than estimated as it raised its 2021 global growth forecast to 6% from 5.5% less than three months ago.  In its latest World Economic Outlook released this week, the IMF said that the economy of Saudi Arabia, which is the region’s largest, is expected to grow 2.9% this year, up from the 2.6% forecast in January.  The kingdom’s economy last year contracted 4.1% due to shocks from the pandemic and lower oil prices.  According to the IMF, the United Arab Emirates, which is the Gulf’s second largest economy, will see a growth of 3.1% this year rebounding from the contraction of 5.9% in 2020.  Oman saw the biggest revision from an expectation of 0.5% contraction this year to a forecast of 1.8% growth.  Bahrain’s economy is expected to grow 3.3% from a forecast of 2.3% in October. The forecasts for Kuwait and Qatar remained almost unchanged as Kuwait is expected to post 0.7% this year up from October’s estimate of 0.6%.  The IMF further said that the unprecedented public spending to fight the COVID-19 pandemic primarily from the US would push global growth to 6% this year the fastest since 1976. 


Oil fell on Monday due to an increase in output from OPEC+ and the threat of another severe COVID-19 wave that offsets the strong economic rebound in the US.  Oil has recovered from historic lows last year with the support of OPEC+ cuts most of which will remain after July. Oil prices rose on Tuesday supported by strong economic data from China and the US recovering some of the losses from the previous session due to the rise in supply by OPEC+ and the infections in India and parts of Europe.  Brent rose $0.90 or 1.5%, to $63.05 a barrel whilst U.S. West Texas Intermediate (WTI) crude increased by $0.98 or 1.7%, to $59.63. Both contracts fell around $3 on Monday.  According to a Reuters tally, coronavirus-related deaths worldwide passed the 3 million on Tuesday as the resurgence of coronavirus infections is challenging the vaccination efforts worldwide.  Market sentiment was more cheerful as US services activity data for March hit a record high.  China’s service sector has also gathered momentum with the sharpest increase in sales in three months.  Meanwhile, the UK is set to ease more restrictions on the 12th of April with the opening of businesses including all shops, gyms, hair salons and outdoor hospitality areas.   These factors all helped to offset the concerns about the agreement last week by the OPEC and its allies to bring back 350,000 barrels per day (BPD) of supply in May, a further 350,000 BPD in June and another 400,000 BPD in July.  The market’s attention is now on the indirect talks between the US and Iran in Vienna to revive the 2015 nuclear deal between Tehran and world powers, that could lead to Washington lifting sanctions on Iran’s energy sector.  On the other hand, the escalating tensions between Saudi Arabia and India continued.  Indian state refiners plan to buy 36% less oil from Saudi Arabia in May than normal according to sources. 


Gold rose to its highest in more than a week on Tuesday amid an easing dollar and lower US Treasury yields. However, more appetite for riskier assets kept the advances in gold in check. Spot gold climbed 0.2% to $1,732.53 an ounce by 10:59 GMT after hitting its highest since March 25 at $1,738.32. Furthermore U.S. gold futures gained 0.2% to $1,732.70. The risk sentiment in the wider financial markets remained upbeat. Global equities reached record highs amid strong economic data from China and the US reducing the demand for safe-haven assets such as gold. Investors were also waiting for the FED minutes on Wednesday for further clues on monetary policy outlook. Gold prices dropped on Wednesday amid the increased coronavirus vaccinations and upbeat data from the US that sparked hopes of faster economic rebound impacting gold’s appeal. Spot gold was down 0.2% to $1,740.37 per ounce by 06:34 GMT whilst U.S. gold futures slipped 0.2% to $1,739.40 per ounce. As Asian shares climbed to their three-week’s high the appeal for gold dropped.

Market Wrap

Data from stock exchanges showed that overseas investors sold a net combined total of $3.18 billion in South Korean, Taiwanese, Philippine, Thai, Vietnamese, Indonesian, and Indian stocks last month. Foreigners were net sellers of Asian equities for the third consecutive month in March due to higher US Bond yields and a stronger Dollar.  Despite Asian equities were attractive at the beginning of the year on bets over the region’s faster recovery from the pandemic in comparison to Western countries, the outflows in the first quarter suggest a reversal of sentiment.  Taiwan and South Korea, which house many high-flying tech stocks, faced the biggest outflows in the region, witnessing net sales of $3.2 billion and $1.3 billion, respectively.  The S&P closed Monday at a record high and likewise Wall Street’s main indexes climbed to an all-time high after data pointed to a strong U.S. labour market, a recovery in business activity that helped lift the global mood even though coronavirus spiked worldwide.   Economically sensitive sectors such as banking, commodity and automakers strongly rebounded this year, boosting European stocks.

World stocks recorded high levels on Tuesday amid strong economic data from China and the US.  Meanwhile, currency and bond markets paused after a month of rapid gains in the Dollar and treasury yields.  Equities as measured by the MSCI All Country World index reached a record high as European stocks caught up with gains in Asia and Wall Street overnight in their first trading session since the Easter holiday.  Europe’s benchmark equity index hit a record high on Tuesday, recovering all its pandemic driven losses as investors bet on a speedy global economic recovery supported by stimulus spending and vaccination programs.  The DAX rose 1.1% adding to its record setting rally and the CAC 40 climbed 0.6%, also fully recovering from last year’s levels and UK’s FTSE 100 jumped 1.2%.  China stocks retreated on Tuesday pressured by healthcare and consumer companies.  Asia’s stock markets rose as another batch of strong US economic data boosted the global outlook while currency and bond markets paused after a month of rapid gains in the Dollar and in US Treasury yields. 

European stocks hovered near their record highs on Wednesday supported by gains in real estate and telecom shares.  Meanwhile faster vaccinations and a weaker pound helped the UK equities to outperform.  The UK’s exporter-heavy FTSE 100 gained 0.7% amid a weaker Pound while the domestically focused midcap index hit a record high as Britain began the roll-out of Moderna vaccine.  Economically sensitive sectors such as banks, energy and automakers pushed European stocks to pre-pandemic levels earlier in the week, as investors bet on stronger global economic recovery driven by vaccines and the unprecedented stimulus measures.  The S&P 500 closed slightly higher after the release of the FED minutes of the latest meeting that reinforced the US central bank’s position to remain patient before raising rates.  The major indexes remained nearly unchanged.  The yield on the benchmark 10-year U.S. Treasury note moved higher late in the session yet remained below a 14-month high of 1.776% hit on the end of March. The recent pullback in yields has helped growth companies, lifted technology and communication services stocks as the best performing sectors on the day. The Dow Jones Industrial Average rose 0.05% to 33,446.26, the S&P 500 gained 0.15%to 4,079.95 and the Nasdaq Composite dropped 0.07% to 13,688.84. Value stocks that include economically sensitive sectors such as materials and industrials maintain a strong lead this year over their growth counterparts, mainly tech-related firms. 

European stocks hit record highs on Thursday on optimism around a global stimulus-led economic rebound after the U.S. Federal Reserve pledged to keep monetary policy loose. The pan-European STOXX 600 rose 0.5% by 07:20 GMT, adding to gains made earlier this week. Miners, automakers, and retailers led gains on the index moving up between 0.7% and 1% in early trading.

Currency Roundup

On Monday, the Pound recorded its best day against the weakening Dollar since mid-February, as US Treasury yields held below recent highs and the low liquidity as many parts of the world were on the Easter holidays.  Against the Euro, Sterling hit a one-week low of 85.45 pence on Tuesday, after having its best quarter since 2015 versus the Euro. 

Sterling slipped on Tuesday as traders continued betting on as speedy re-opening of the British economy.  Over the past few months, Sterling found support over bets on economic recovery due to the rapid COVID-19 vaccination programme.   The US Dollar rebounded from a near two-week low on Tuesday as short-term optimism about the outlook for the US economy prompted investors to consolidate positions after a selloff overnight.  The Dollar has risen this year along with Treasury yields as investors bet the US would recover faster from the pandemic than other developed nations amid massive stimulus and aggressive vaccinations. March was the biggest monthly gain for the Dollar since the end of 2016

Sterling sank on Wednesday amid profit-taking by traders after a strong first quarter for the currency that pulled it to a week low against the Dollar and its lowest in two weeks against the Euro. The Sterling was down 0.14% against the Dollar at 1.3802 after hitting a one-week low of $1.3773 in early deals.  It traded 0.15% lower to the Euro at 86.03 pence.  Investors expected limited losses for the Pound.  Some have also cited seasonal factors such as the end of the tax year in Britain for expectations that it will appreciate.  Meanwhile, the expectations of an economic rebound in Britain amid the rapid roll-out in vaccinations, helped the Sterling to record its best quarter since 2015 against the Euro. According to Vaccine Deployment Minister, Nadhim Zahawi, Britain will start the rollout of Moderna’s COVID-19 vaccine in mid-April.  The inoculation programme was on track to meet the government targets.  China’s Yuan touched a two-week high against the US Dollar on Wednesday before giving back all the gains at mid-day as investors became cautious and waited for movements in the Dollar. Earlier gains in the Yuan were tracking a softer Dollar. The greenback hit a two-week low against a basket of currencies after US bond yields declined and traders rolled back the aggressive expectations that the Federal Reserve will tighten its policy earlier than pledged.  The Dollar hovered near  two-week lows after the US bond yields eased from recent highs, while market participants waited the FED’s minutes to be released later in the day and determine the future path of the Dollar.  The previous quarter saw a spike in US treasury yields and the Dollar’s strongest rally in years amid rising expectations that accelerating US economic growth and inflation could drive the FED to abandon its pledge to keep interest rates near zero until 2024.  The Euro-Dollar was steady at $1.18705 after having strengthened so far in April.  In 2021, the Euro has been driven by prospects of the economic recovery from COVID-19 and has picked up over the past week.    

On Thursday, the Sterling stabilised against the Dollar and the Euro lessoning some of the losses from yesterday’s profit taking.  Sterling was helped by the expectations of an economic rebound in Britain and lower expectations that the Bank of England will push interest rates to negative territory also supported the currency. 

Malta: Government Expenditure on Social Security Benefits

A press release dated 7th April, shows that in 2020 spending on Social security benefits amounted to €1,076.9 million, 7.9% higher than the previous year.  Whereas both contributory and Non-Contributory benefits reported an increase, the former accounted for 85.3% of total increase in social expenditure.  Government spending towards Contributory benefits amounted to €878.3 million, €14.5 million of which covered COVID-19 social benefits. Total contributory spending rose by 8.3% from 2019. In addition to the COVID-19 social expenses higher spending was also reported under Pensions in respect of Retirement (€39.6 million) €23.1 million of which was attributed to a higher number of two-thirds pensioners.  Other increases were registered in respect of Widowhood, contributory Bonus and Other Benefits.  Meanwhile lower expenditure was reported under the pensions in respect of invalidity and benefits in respect of industrial injuries and gratuities. 

Between January and December 2020 non-contributory expenditure increased by 6.2% in comparison to 2019.  The largest increases were registered under the Disability Pensions/Allowance and Old Age Pension.  A higher outlay was also reported for Child Allowance, Total In-Work benefit, supplementary allowance, and Non-Contributory Bonus.  Spending towards Total Social Assistance declined by €2.7 million. 

In 2020, the largest number of contributory beneficiaries was reported under the Two-Thirds pension.  The Unemployment benefit reported the highest increase in beneficiaries after the introduction of the COVID-19 Additional Unemployment Benefit, with the largest decrease being recorded under the sickness benefit. 

Malta:  Unemployment Rate – February 2021

In a press release dated 6th April in February 2021, the monthly unemployment rate was 4.4%.  For the month under review, the unemployment rate for males was 4.5% while the rate for females stood at 4.2%.  Meanwhile, the unemployment rate during February 2021 for persons aged 15 to 24 years was 10% and the rate for those between 25 and 74 years stood at 3.7%. 

Antonella Mercieca

Client Relationship Manager


Reuters, https://nso.gov.mt/


April 8th, 2021

‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’

Timberland Finance,
Aragon House Business Centre,
Dragonara Road,
St Julian’s, STJ 3140,