Diaporama utilisé par Philippe Ledent, senior economist chez ING, lors du webinaire qu'il a animé pour le Forum financier belge, le 26 mai 2020

1. [Company logo]
Perspectives économiques et financières:
La zone euro pourra-t-elle survivre à un tel choc?
26 May 2020
Philippe Ledent
Economic Research

2. In Italy, deceleration was much slower…
2
Daily new coronavirus cases (moving average 5 days)

3. Second wave: France, Spain, Germany, Belgium: same
pattern as Italy
3
Daily new coronavirus cases (moving average 5 days)

4. US: it will take time
4

5. The end of globalisation? At least for now…
5
World trade volume

6. Behind the loss of traffic…
…there is a loss of activity
6
Liefkenshoektunnel
Traffic of lorries (vehicles > 3 meters high - YoY) Traffic of light vehicles (vehicles < 3 meters high - YoY)
Impact of the coronavirus on revenues
in the logistics sector (in %, compared to 2019)
Weekly survey of National Bank
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
2016 2017 2018 2019 2020
-30%
-20%
-10%
0%
10%
20%
30%
2016 2017 2018 2019 2020
-26.4% -64.6%

7. It looks like a V-shape recovery…
…but it will not be…
7
Chinese PMI

8. China: Lockdown strongly affects consumption and
activity
8
PMI (employment component)
Retail Sales (YoY - %)

9. Let’s wait for the “V”
9
Composite PMI in the Euro area

10. German Ifo index recovers (slowly…)
10
!

11. Belgium: consumers are afraid and plan to save
11
Saving forecast
Economic situation forecast

12. US economy: The employment cliff
12
In 6 weeks time, employement came back to
its 2010 level

13. Stress in US commercial paper market
13

14. Simulation of a recovery path (ING forecasts)
14
84
86
88
90
92
94
96
98
100
102
104
4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23 3Q 23 4Q 23
US Eurozone
The recovery is
likely to take
time…
Around -
15% loss
(Q2)
Real GDP level in the US and the Euro area
(Q4 2019 = 100)

15. The recovery pattern of Belgium in perspective
15
84
86
88
90
92
94
96
98
100
102
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
2001 2008 2020
End-2020:
Back to lowest level duringthe financial
crisis
2023:
Back to pre-crisis level
GDP index (100 = top of cycle)

16. 0
10
20
30
40
50
60
BE FR DE US NL EMU ES IT
# quarters needed to return to Q1 2008 GDP
# quarters needed to return to Q1 2008 GDP
It took some time for economies to return to their pre-
crisis level after financial crisis
16

17. Inflationary or deflationary shock?
17
Lowest level since 2002
Stronger yearly drop…ever
Oil price drop will lower inflation in the short term
In the medium term:
- What will be the impact
of long lasting
disruptions in supply
chains, higher
inventories, re-shoring
of productions,…?
- What will be the long
term impact of huge
quantitative easing
made by central banks?
Oil price
Oil price variation (YoY)

18. Share of “vulnerable” workers in the economy
18
0%
10%
20%
30%
40%
50%
60%
70%
80%
Share of temporary workers, 2018 Shadow economy as % of GDP, 2016 Share of Self-employed, 2019

19. Tourism will be hit hard
19
Source: World travel and tourism council
0 5 10 15 20 25 30
Lithuania
Netherlands
Belgium
Ireland
Slovakia
Latvia
Germany
Finland
Luxembourg
France
Malta
Slovenia
Italy
Spain
Estonia
Austria
Portugal
Greece
Cyprus
% of total employment % of GDP

20. The public finance canyon (the case of Belgium…)
20
238.3
(50.3%)
238.0
(50.2%)
9.3
(2.0%)
Primary
balance:
+0.3
(0.1%)
Budget
balance:
-9.0
(-1.9%)
2019
Total Income
Current spending
+
Capital exp.
Interest charge
221.9
(49.5%)
251.3
(56.1%)
8.3
(1.8%)
Primary
balance:
-29.4
(-6.6%)
Budget
balance:
-37.7
(-8.4%)
2020-16.4
+13.3
-1.0
Assumptions for 2020: Real GDP growth: -6.8%, GDP deflator: 1.4%; Total income decreases from 50.3% to 49.5% of
GDP due to the progressivity of taxation (has been observed in 2009…); current spending increases by 6.4% in 2020
(average over the last decade: 3.1%/year). Cost of debt issued on market: 0.2%
XX Bln. €
XX % of Nominal GDP
(automatic effect
as GDP contracts… and
so the tax revenue…)
The cost of
the coronavirus crisis

21. Public finance heterogeneity
21
Debt to GDP ratio (2019)
2020

22. The shaky euro area story…
22

23. Bond spreads* (EZ break-up risk proxy):
recent evolution
23
Sovereign bond spreads:
evolution (bp) over the last month
Sovereign bond spreads:
evolution (bp) over the last 12 months
*Bond spreads are calculated in bp vs 10Y German bund. Graphs show the evolution of bond spreads, calculated as the
actual change of the spread over the mentioned period

24. « Watever it takes », she nearly said it the second time !
750 Bn€ of bond buying came on top of the pre-announced 120 Bn€
• Likely to last until the end of this year
• More could come (OMT, ESM Corona bonds, buying stocks? Helicopter?)
• Targeted at both sovereign and corporates:
• Sovereign: long term debt, with a temporary disrespect of capital key
repartitions, and including Greek bonds
• Corporates: including (short term) commercial paper (also likely to last until
the end of this year)
NB: despite these efforts, market expectations of larger sovereign bond issuance
delayed the normalization of sovereign spreads
ECB measures
24
Miscommunication 1: « we are not here to reduce spreads »

25. • In TLTRO II which matures in June, banks were financing themselves at least 25bp
above what is now announced for TLTRO III
• TLTRO III will grant unlimited amounts of liquidity at -75bp to banks which makes a
special effort to maintain their credit portfolio constant
• This will require from banks a special effort to replace the falling demand for new
investment loans by bridging credit facilities to corporates
• As TLTRO III only comes in June, all liquidity needs in the meantime are covered by a
special LTRO at -50bp, which is already a bit lower than the TLTRO II rate
=> These operations allow interest rates for corporate credit to stay low, and even lower
in June, provided that there are enough state guarantees behind the loans
ECB measures
25
Miscommunication 2: yes the ECB decreased interest rates. How?

26. Trouble in Karlsruhe…
26

27. …but recovery fund gives some hope
27
• €500 Bn of grants (no guarantees this time around, it is a
“pure” instrument as Macron said)
• Borrowed by the EU Commission (AAA bonds)
• Spent as grants on the “structural fund” model (so almost
all countries benefiting while there is some redistribution
possible, depending on the criteria adopted: if Covid
impact is the criteria and distribution is regional then
capital regions of Spain, France and Italy + some big
regions also in Germany could benefit, but Netherlands
will probably be largely kept out)
• Part of the next multi-annual budget (2021-2027) but
frontloaded over 2-3 years (so maximum 1.5% pp of GDP
per year)
• Unknown features:
• What does temporary mean? No roll over ?
• Do Member States have to guarantee the EU
Commission debt ?
• Will the Commission levy new taxes to service the
debt ? Is that a step towards fiscal union? Is that
even legal (see Karlsruhe?), although the EU
Commission already has debt.

28. Certain of the statements contained in this release are statements of
future expectations and other forward-looking statements. These
expectations are based on management’s current views and assumptions
and involve known and unknown risks and uncertainties. Actual results,
performance or events may differ materially from those in such statements
due to, among other things, (i) general economic conditions, in particular
economic conditions in ING’s core markets, (ii) changes in the availability
of, and costs associated with, sources of liquidity such as interbank
funding, as well as conditions in the credit markets generally, including
changes in borrower and counterparty creditworthiness, (iii) the frequency
and severity of insured loss events, (iv) mortality and morbidity levels and
trends, (v) persistency levels, (vi) interest rate levels, (vii) currency
exchange rates, (viii) general competitive factors, (ix) changes in laws and
regulations, and (x) changes in the policies of governments and/or
regulatory authorities. ING assumes no obligation to update any forward-
looking information contained in this document.
www.ing.com
Disclaimer