MAS warns of job losses, slower wage growth as recession looms

The Monetary Authority of Singapore (MAS) expects increasing job losses and fewer pay rises this year as the economy heads into its worst recession on record.

The central bank said the job market will worsen amid a sharp drop in both economic activity and demand for goods and services at home and abroad.

“The resident unemployment rate is expected to rise and wage growth ease,” MAS said in its monetary policy statement yesterday.

“A degree of labour market slack could emerge as firms pull back on their hiring plans, even as the scale of retrenchments is mitigated by the Jobs Support Scheme,” it said.

MAS noted the “economy will enter a recession”, and will shrink by 1 per cent to 4 per cent this year.

In the fourth quarter of last year, the seasonally adjusted unemployment rate had risen to 2.3 per cent, up from 2.1 per cent in the last three months of 2018.

Unemployment among Singaporean citizens was even higher at 3.3 per cent, up from 3 per cent in the same quarter of 2018.

Retrenchments had also crept up in the fourth quarter of last year to 2,700 persons, compared with 2,470 in the third quarter of 2019.

Even more troubling is the fact that the job vacancy to unemployment ratio has stayed below 1.0 since the second quarter of last year – suggesting there were more unemployed persons than vacancies available.

United Overseas Bank economist Barnabas Gan, in a research note yesterday, compared the current labour market trends to previous periods of crisis, and noted that unemployment rates had risen then despite government intervention.

Singapore’s unemployment rate increased to 4.8 per cent in the third quarter of 2003 during the severe acute respiratory syndrome (Sars) outbreak, up from 3.6 per cent the previous year.

Similarly, during the global financial crisis (GFC), the unemployment rate rose to 3.3 per cent in the third quarter of 2009, up from 2.3 per cent in the second quarter, despite the introduction of the $20.5 billion Resilience Package then.

“Coupled with the initial stress seen in Singapore’s labour market prior to the Covid-19 outbreak, the pandemic will likely further weaken Singapore’s labour market in 2020,” Mr Gan said.

“As such, we pencil Singapore’s unemployment rate to rise to 3.5 per cent in 2020, similar to the impact seen during Sars and GFC.”

However, Mr Gan pointed out, the level of government support announced this time around – a total of $55 billion – is more than twice the level of support given during the global financial crisis and should help mitigate some of the negative impact of the crisis.

Weak labour market conditions and consumer sentiment, however, may lower inflation, capping costs for businesses and prices for consumer goods.

MAS lowered its 2020 forecast range for both core inflation, which excludes the costs of accommodation and private road transport, and overall consumer price inflation to minus 1 per cent to 0 per cent.

Core inflation fell last month into negative territory for the first time in a decade as the pandemic’s damage to demand outweighed price pressures from supply disruptions.

MAS expects external sources of inflation to weaken in the near term amid the global downturn and, in particular, due to the sharp slide in oil prices, which are expected to stay low for an extended period.

“However, supply chain disruptions arising from worldwide measures to contain Covid-19 could put some temporary upward pressure on imported food prices,” it said.

Maybank economist Chua Hak Bin, in an e-mail reply to questions yesterday, said imported inflation can also rise due to hoarding of staples by some of the leading food exporters.

Vietnam, for example, halted overseas shipments of the commodity from Tuesday to Saturday last week to ensure its own food security.

“Food prices may see a temporary increase in March and April due to the supply chain disruptions, but will not offset the broad-based decline,” Dr Chua said.

MAS expects rentals to be broadly flat as demand for accommodation eases in line with the reduced inflow of foreign workers.

Dr Chua said businesses are focused on survival and staying afloat, as revenue topline is collapsing and margins are coming under pressure.

On the other hand, consumers stuck at home will cut back on discretionary spending and holidays.

“Severe job losses in the coming months could see consumers delaying big-ticket items, including cars and housing,” he said.

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Winnipeg man starts dream job — right as coronavirus pandemic hits

It seemed like great timing for a Winnipeg man to quit his longtime career to follow his dream of owning a yoga studio — at least until COVID-19 reared its ugly head.

Reid Davies, new co-owner of Modo Yoga, says he’s staying positive, despite the coronavirus pandemic scuppering his plans — at least for the time being.

“My big piece of life advice to everybody, when they ask me how I’m doing in my new world, is just ‘don’t buy two yoga studios right before a pandemic.’”

Davies said he had been working in sales for most of his career, and although he enjoyed the people and the companies he worked for, the extensive travel across Canada and the U.S. was losing its appeal. He wanted a career with a better work-life balance.

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“When I went to my first yoga class about 11 years ago, I thought, ‘I’m gonna be a yoga teacher one day, when I grow up’… and then the opportunity sort of came about last summer,” he said.

To stay active within that community, he said Modo has been offering on-demand virtual classes, as well as live classes via Instagram, and has been keeping connected with technology as much as possible.

Besides, he said, if there was ever a business to be in during such a stressful, uncertain time, it’s yoga.

“When I put in my application for becoming a member of this community and an owner, they say, ‘why yoga?’, and my first line was, ‘my family likes me better when I’m doing yoga.’

“I think this is the perfect time to start doing yoga.”


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Ukraine plans to treble 2020 budget deficit: government draft

KIEV, March 30 (Reuters) – Ukraine’s government on Monday proposed trebling the 2020 budget deficit to 298.4 billion hryvnia ($10.65 billion) from the earlier estimate of 96.3 billion hryvnias due to lower than expected revenues.

The revenues could drop 11% while Ukraine needs to increase expenditure by 7%, the government said in a draft submitted for parliament’s approval.

It did not provide an estimate of the deficit as a percentage of gross domestic product.

Ukraine’s Prime Minister Denys Shmygal said late on Sunday the government had revised its macroeconomic forecasts for 2020 as the country would face a sharp economic hit from the coronavirus epidemic. ($1 = 28.0130 hryvnias) (Reporting by Natalia Zinets; editing by Matthias Williams)

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US stimulus package is biggest ever, but may still not be enough

BOSTON (REUTERS) – The Federal Reserve has offered more than US$3 trillion (S$4.3 trillion) in loans and asset purchases in recent weeks to stop the US financial system from seizing up, but it has not yet directly helped large swaths of the real economy: companies, municipalities and other borrowers with less than perfect credit.

That is partly because America’s central bank is not allowed to take much credit risk itself, and loans to lower-rated borrowers have a higher chance of losses. The risk is exacerbated by efforts to stop the spread of coronavirus which have brought economic activity to a screeching halt.

To alleviate that constraint, the US Treasury – whose job it is to manage the government’s finances and help the Fed keep the economy steady – has taken on some of the risk that Fed loans will not be paid back.

It has contributed about US$50 billion from a pool of money called the Exchange Stabilization Fund. That money will be used to absorb losses from Fed loans that go bad. Assuming only a fraction of loans will default, the Treasury contribution has allowed the Fed to lend much more without taking on additional risk.

On Friday, the Treasury got about US$450 billion more from Congress as part of a US$2.2 trillion US stimulus package, greatly increasing its ability to support the economy. Before the bill passed, the stabilization fund had about US$93 billion in assets as of the end of February.

Treasury Secretary Steven Mnuchin told Fox News on Sunday he believed the additional funds could help the Fed and Treasury provide about US$4 trillion in loans.

But investors and economists said even this additional money may be insufficient, and Congress will likely need to pony up trillions of dollars more before the Fed and Treasury can make a significant dent in the real economy. If it does not, many US companies and local governments are at risk of defaulting on debt or even going under.

That is because of the sheer size of the world’s largest economy, the unprecedented scale of economic disruption caused by attempts to contain the virus and higher credit losses if the government has to step in to support weaker borrowers, according to these experts.

Scott Minerd, chief investment officer of Guggenheim Partners and member of an investor committee that advises the New York Federal Reserve on financial markets, told Reuters he believes the government needs to give the Treasury about US$2 trillion to help prop up the economy.

Using expected losses from companies in the lowest tier of investment grade, Minerd estimates that the money approved last week might be only enough to absorb losses on loans of about US$900 billion.

BARE MINIMUM

That is just a fraction of the roughly US$9.5 trillion in outstanding US corporate debt, much of which is either in the lowest-tier investment grade rating or already rated as junk, with a higher risk of default. Other areas that need support – such as the commercial paper market where borrowers go for short-term funding or the municipal market that local governments use to raise money for roads and schools – total trillions of dollars more.

“I think we’ll be back at the table with another programme before this is over,” Minerd said in an interview.

With the US$2 trillion that he recommends, he said, “you’re on your way to have something of a big enough scale to get things propped up.”

In a research note last week, Bank of America analysts said the US$2 trillion aid package passed last week was the “bare minimum.” They estimated the government will need a total of US$3 trillion in fiscal stimulus and more if the recession deepens.

The Fed declined to comment. The Treasury did not respond to a request for comment on Sunday.

The Fed has so far kept its pledge to lend to companies with investment-grade ratings, and to buy other high-quality assets such as Treasury securities.

The aim of the Fed’s support is to encourage banks and investors to lend to weaker, and therefore more risky, companies and local governments, where they can earn higher returns, giving them access to the funding they need to continue operating and paying staff.

In some of the Fed’s funding facilities, the Treasury put up US$10 billion as loss-absorbing capital for every US$100 billion of loans. Mnuchin’s comment that the Fed and Treasury can now lend US$4 trillion suggests he expects the rate of losses on the new loans to be similar, less than 10 per cent.

WEAKER CREDITS

Investors said losses would likely increase, however, if the government has to reach deeper into the economy. And they are betting the Fed will have to do so – junk bonds rallied last week, for example.

“‘We’re only going to lend money to really good credits’ is a good model if you’re a bank,” said Charles Lemonides, founder of New York-based investment firm ValueWorks LLC. “But if you’re trying to rescue businesses that are otherwise failing, it’s not a very good strategy.”

Fed officials have signaled they are not ruling anything out in their efforts.

In its support for the commercial paper market, for example, the Fed allows for companies that are downgraded after March 17 to return at least once more to the trough for funding.

In its facility to make loans to investment-grade companies through a special purpose vehicle, the Fed said, “The scope of eligible issuers may be expanded in the future.”

But officials know that reaching lower down the credit-quality spectrum entails greater risk and might require a larger contribution from Treasury to account for it.

In time, as they see how the programmes for higher-quality borrowers play out, they may grow more comfortable with casting a wider net and explore ways to get cash to shakier corporate borrowers while limiting their risk.

Mohamed El-Erian, chief economic adviser to the German insurer Allianz SE, said backstopping non-investment grade credit would be a much harder decision for the Fed, given the degree of corporate credit and default risks involved.

“I suspect that any move in that direction would need to come with a massive fiscal backstop to protect the integrity of the Fed’s balance sheets,” El-Erian said.

LIMITING LOSSES

The Fed’s initial steps into the corporate bond market, limiting its scope to investment grade issuers, essentially avoids rewarding or bailing out badly run companies.

The Fed is justifying its move as help to companies that are caught in a situation not of their making, said Nellie Liang, former head of the Fed’s financial stability office and now at the Brookings Institution think-tank.

“It is a question of limiting losses,” Liang said in a webinar last week organized by Princeton University.

But the pressure on the Fed and Treasury to lend to riskier borrowers is only likely to increase if quarantines, stay-at-home orders and other economy-killing restrictions persist.

In the weeks ahead, the pool of high-grade borrowers currently allowed in the program will likely shrink.

The three major credit ratings agencies – Moody’s, S&P and Fitch – are certain to cut a number of companies now at the lowest tiers of investment grade into junk territory, as happened last week to Ford Motor Co.

That could become an issue, said Kathy Bostjancic, chief US economist at forecasting and analysis firm Oxford Economics.

“You can argue there is a need and the Fed has a lot more insurance backing from the US Treasury” to delve into the riskier part of the bond market, Bostjancic said.

“However, it could entail significant losses and so risky for the Fed and they might stay away from it,” she said.

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Could the COVID-19 pandemic be an environmental inflection point?

Our cars are sitting in our driveways as many of us work from home, huge airlines are mothballing their fleets, and businesses around the world have closed their doors due to the novel coronavirus pandemic.

It is a semi-apocalyptic scenario that no one could have foreseen just two months ago.

The spiraling death toll is hard to fathom, and the grief for those in mourning doesn’t bear thinking about.

After the worst is over, our public health systems will certainly change forever, but could the fallout also result in us changing our consumption-heavy lifestyles in ways that could prevent a future outbreak, or in ways that improve the air we breathe?

The UN’s environment chief hopes so, saying in an interview with The Guardian newspaper that “nature is sending us a message.”

The Executive Director of the UN Environment Programme Inger Andersen said the way we are exploiting the planet’s resources is making it easier for “pathogens to pass from wild and domestic animals to people.”

“There are too many pressures at the same time on our natural systems and something has to give,” she said.

“We are intimately interconnected with nature, whether we like it or not.

“If we don’t take care of nature, we can’t take care of ourselves.”

Scientists believe that an animal market in Wuhan, China was the source of the novel coronavirus outbreak.

China has since temporarily banned the trade and consumption of live animals.

Some experts believe that climate change and the destruction of wildlife habitats can change the way viruses spread between species.

Pollution reduction

If Covid-19 serves as a reminder from Mother Nature of how poorly we are treating her, then paradoxically, it is also giving us a glimpse into how healthy she used to be.

The pandemic has revealed a remarkable change in pollution levels in the places worst-affected by the virus.

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Fish can be more-easily seen swimming in the now-clear canals of Venice, and air pollutants have dropped noticeably in China, Italy and New York.

“For the about four-week period after the lockdowns in China started, everything from coal-fired power plants, to oil consumption for transport, to industries like cement were heavily affected,” said Lauri Myllyvirta, Lead Analyst at the Centre for Research on Energy and Clean Air.

“We saw operating rates that were about a quarter lower than usual at that time of the year. And all of that meant that CO2 (carbon dioxide) emissions were reduced by about 25 per cent.”

CO is an indirect contributor to global warming and climate change.

Commane said the CO levels have dropped by half, with the changes being most striking at rush hour.

“I fully expect that the air quality is going to get worse in some places (after the pandemic) because people are throwing regulations out the window to get things moving again,” she warned.

The question is: which places will make the decision to take a different path when it comes to air quality and climate change?

Inflection point

Fellow Columbia academic Amy Turner specializes in climate law at the Sabin Center for Climate Change Law.

“We’re at an inflection point in the sense that we’ve seen massive collective action around the pandemic,” said Turner.

“We also have the opportunity to reset the economy in a way that mitigates climate change.”

She thinks a glimpse into a world where fewer people drive to work every day could help influence how lawmakers shape our future.

“Governments could offer incentives to employers to allow their employees to work from home some of the time,” she said.

“That is something that we may see come out of this. And, you know, I think that would be a good thing if at least some transportation emissions were able to be reduced, because people are now more comfortable working from home at least some of the time.”

Turner says pandemics, just like pollution and climate change, tend to affect the poorest the most.

“They’re more likely to live near big highways, near bus depots, near power stations, and so there’s much more local air pollution,” she said.

“Often those communities are located in places that are particularly susceptible to disasters.”

Climate change aside, the direct, short-term health benefits of reducing emissions would most likely see lives improved and saved.

“Air pollution is responsible for millions of premature deaths globally, and in fact the reduction in pollutant levels means that tens of thousands of deaths will be avoided,” said Myllyvirta.

“That’s not to say that this crisis, with all the suffering that it entails, is a good thing, but it does highlight how normalized these public health impacts of air pollution have become.”

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Top U.S. House Republican says another coronavirus stimulus bill may not be needed

WASHINGTON, March 29 (Reuters) – The top U.S. House of Representatives Republican said on Sunday that a fourth economic stimulus package to try to curb the economic fallout from the coronavirus pandemic would be premature and may not even be necessary.

“I’m not sure we need a fourth package,” House Minority Leader Kevin McCarthy told the Fox News program “Sunday Morning Futures,” noting he wants to see the first three packages totaling more than $2 trillion take effect first.

Illustrating the continuing tensions between the two parties in Congress, he added that he fears House Speaker Nancy Pelosi, a Democrat, would try to use a fourth package to insert a political wish-list of items. (Reporting by Sarah N. Lynch; Editing by Will Dunham)

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UPDATE 1-Brazil's stocks, real rise, Bovespa eyes best week in four years

(Adds quote, detail)

By Jamie McGeever

BRASILIA, March 26 (Reuters) – Brazilian markets rallied on Thursday after a $2 trillion U.S. stimulus package boosted investor sentiment around the world, putting stocks on course for their biggest weekly gain in four years and the currency on track for its best week this year.

Measures of market volatility fell and lending spreads narrowed, indicating that the severe stress on Brazilian markets stemming from coronavirus pandemic fears in recent weeks were starting to ease.

The benchmark Bovespa stock market closed up 3.66% at 77,700 points and the real closed at 4.9957 per dollar , while implied FX volatility fell to its lowest in two weeks and some long-dated interest rate futures fell below 8%.

“Good news, the stock market is rising for the third day in a row,” said one senior trader in Sao Paulo, noting that firms with good cash buffers will survive the crisis and will offer good value to credit and equity investors.

The Bovespa’s rise took its gains so far this week to over 15%, which would be the biggest weekly increase since April, 2016, and the real is now up more than 1%, eyeing its biggest weekly gain this year.

Analysts at Citi said on Thursday that emerging market credit markets may have reached a bottom, and while volatility will remain high, “we could see some normalization following policy responses to curb the virus in G10 countries.”

Earlier on Thursday Brazil’s central bank lowered its 2020 economic growth outlook to zero from 2.2% due to the coronavirus impact.

Central bank President Roberto Campos Neto said the main channel of support for the financial system remains ensuring banks have ample liquidity, adding that he was completely relaxed about the strength and stability of the banking system.

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CEE MARKETS-Stocks jump on U.S. stimulus, but virus crisis not over

    By Anita Komuves
    BUDAPEST, March 25 (Reuters) - Central European stock
markets rose, led by Prague, and regional currencies gained on
Wednesday as the United States agreed on $2 trillion economic
stimulus bill, lifting market sentiment around the world. 
    The stimulus package includes a large increase in
unemployment insurance and hundreds of billions of dollars to
aid companies harmed by the coronavirus.
    "It is too early to open the champagne bottles, the plateau
of the pandemic is well ahead of us," CIB bank said in a note.
"And we will only be able to assess the damage to the real
economy later." 
    Central European governments have also announced a series of
emergency measures recently to counter the economic blow from
lockdowns, production halts and disruption to business activity
and supply chains.
    The Czech, the Polish and the Romanian central banks have
cut their benchmark rates. The National Bank of Hungary left
interest rates unchanged on Tuesday, as expected, and announced
further steps to boost liquidity. It introduced a new fixed-rate
collateralised loan instrument with unlimited liquidity.

    The first tender of the new instrument will be held later on
Wednesday. 
    "This tool will be able to stabilize not only lending, but
also the government securities market ... and this is what we
have seen today," Deputy Governor Marton Nagy said, referring to
a drop in yields, especially at the long end of the yield curve
on Tuesday.
    Five- and 10-year government bond yields dropped in Hungary
by more than 50 basis points on Tuesday before the NBH's
announcements, anticipating the measures, analysts say. 
    Yields on the 10-year Hungarian bonds were up by 20 basis
points on Wednesday, an FI trader in Budapest said. 
    "The market is disappointed because what the NBH announced
is not proper QE, contrary to what is happening in neighboring
countries," he said.
    The Hungarian forint gained 0.57% on Wednesday and
was trading at 352.50 to the euro after slipping the day before
as a reaction to the NBH's measures.
    Elsewhere, the Czech crown was also up, gaining
0.5% and trading at 27.557 to the euro. The zloty
gained 0.66% and was trading at 4.576. The Romanian leu
 was stable. 
    The Czech Republic holds a bond auction on Wednesday with
results due after 1100GMT.
    "Today's bonds auction will be a first test of where demand
currently is," Komercni Banka trader Dalimil Vyskovsky said in a
note. 
    "The finance ministry is offering a set of three bonds ...
as the issuer seems to be trying to offer investors a wider
range of instruments to test where demand will be strongest."
    Czech bond yields were dipping on Wednesday after a drop
yesterday, correcting from a spike in the past few days.
    Regional stock indexes were up, with Prague's equities
jumping more than 7% by 0857 GMT. Budapest and Bucharest
 were up by 3% and Warsaw's stocks gained nearly
3%.          

            CEE        SNAPSHOT    AT                         
            MARKETS               0957 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.5570   27.6950    +0.50%    -7.71%
 crown                                                
 Hungary                352.5000  354.5000    +0.57%    -6.06%
 forint                                               
 Polish                   4.5761    4.6065    +0.66%    -6.99%
 zloty                                                
 Romanian                 4.8390    4.8445    +0.11%    -1.05%
 leu                                                  
 Croatian                 7.6090    7.6115    +0.03%    -2.15%
 kuna                                                 
 Serbian                117.4900  117.5450    +0.05%    +0.07%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   851.78  794.7400    +7.18%   -23.65%
 Budapest               33758.50  32614.56    +3.51%   -26.74%
 Warsaw                  1494.06   1451.02    +2.97%   -30.51%
 Bucharest               7719.84   7472.17    +3.31%   -22.63%
 Ljubljana                739.98    706.27    +4.77%   -20.08%
 Zagreb                  1437.84   1403.99    +2.41%   -28.73%
 Belgrade   <.BELEX15     623.04    616.31    +1.09%   -22.28%
            >                                         
 Sofia                    432.07    418.88    +3.15%   -23.95%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.3210    0.0870   +192bps     +5bps
            >                                         
   5-year   <CZ5YT=RR     1.5120    0.0700   +199bps     +4bps
            >                                         
   10-year  <CZ10YT=R     1.5530   -0.0010   +185bps     -3bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     0.9650    0.0320   +157bps     +0bps
            >                                         
   5-year   <PL5YT=RR     1.4220    0.0820   +190bps     +5bps
            >                                         
   10-year  <PL10YT=R     1.9420    0.1450   +224bps    +12bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.69      0.40      0.35      1.76
            PRIBOR=>                                  
 Hungary            <       0.45      0.42      0.33      0.55
            BUBOR=>                                   
 Poland             <       0.55      0.42      0.44      1.17
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; editing by Larry King)
  
 
 

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Malaysia offers more loan deferrals to blunt coronavirus impact

KUALA LUMPUR (BLOOMBERG) – Malaysia’s banks will offer broader loan deferrals that will involve RM100 billion (S$32.8 billion) of funds as the country seeks more ways to soften the pandemic’s impact on its economy.

Banks will offer six-month deferrals for all loans held by individuals and small businesses and let people convert their credit card debt into a three-year term loan, the central bank said in a statement on Wednesday (March 25).

Corporate borrowers will be allowed to defer or restructure their borrowings in order to protect jobs and resume activities once the situation improves, according to the statement.

The measure is the latest in a series of stimulus steps unveiled by Malaysia, which has imposed sweeping restrictions on movement to curb South-east Asia’s highest number of coronavirus infections.

Among the changes:

Banks can draw down capital conservation buffer of 2.5 per cent, operate below minimum liquidity coverage of 100 per cent and use regulatory reserves set aside during times of strong loan growth;

Central bank to lower minimum Net Stable Funding Ratio to 80 per cent, from 100 per cent, when it’s implemented on July 1;

The government is set to announce a more comprehensive package on March 30, a day before the current lockdown is set to end. That will follow billion-dollar measures rolled out as early as February to help the economy, including lowered minimum pension contributions and discounts to electricity tariffs.

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UPDATE 2-Greece says coronavirus to drive economy into recession

(Adds number of new cases, details)

ATHENS, March 24 (Reuters) – Greece’s economy will contract this year because of the coronavirus lockdown but the projected recession will be temporary, the finance minister said on Tuesday.

It was a rapid re-estimation as the minister had projected eight days ago that the economy would weather the coronavirus storm and grow just over 0%.

“The situation in Greece’s economy has deteriorated and continues to deteriorate,” Christos Staikouras said in a televised address. “The crisis is deep, it will become deeper and the economy will turn into recession in 2020.”

Greece, which exited its latest bailout in 2018 and was recovering after a multi-year downturn, had been projecting that its economic output would increase by 2.8%.

Staikouras said the downturn will be temporary but the damage to the economy in the short term would be significant.

The country confirmed 48 new cases of coronavirus on Tuesday, bringing the total since its first recorded case on Feb. 26 to 743 people, including 20 people who died. More than 130 people are being treated in hospital.

Among the latest cases were 21 Greek passengers of two flights from Spain, who the state put protectively in quarantine in a hotel earlier this week.

“It was a health bomb ready to explode,” crisis management minister Nikos Hardalias said.

Greece has imposed a curfew restricting the movement of people, with few exceptions, and has halted arrivals from non-EU citizens and those from Italy and Spain. It has also shut down hotels across the country.

Tourism is the Greek economy’s main driver and the sector expects hundreds of millions of euros in revenue losses.

Prime Minister Kyriakos Mitsotakis said last week the government would inject 10 billion euros to support the economy through tough times due to the coronavirus outbreak.

Greece’s central bank slashed growth projections for the economy to 0% from a previously estimated 2.4% this year due to the impact of the coronavirus epidemic. (Reporting by Lefteris Papadimas and Angeliki Koutantou, writing by George Georgiopoulos and Renee Maltezou, editing by Ed Osmond and Angus MacSwan)

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