The Banking Executive Magazine - Septmber Issue 2021

Pandexit from an Economic Perspective on the Italian right. But neither has come to pass. Nor has Frexit, or France’s unilateral withdrawal from the European Union. The far-right politician Marine Le Pen previously flirted with the idea, but then let it drop. And the only candidate in the 2017 French presidential election who advocated it, François Asselin- eau, won just 0.9% of the vote. Such exits seem to put off most con- tinental Europeans. To date, only Brexit has actually happened, even though polls in the month before the United Kingdom’s June 2016 referen- dum showed that more French than British voters were unhappy with the EU, by a margin of 61% to 48%. All these potential and actual exits were regarded by most economists as undesirable. Now another is under discussion that everyone hopes will happen: Pandexit. This unsightly portmanteau encapsulates the optimistic idea that we can soon hope to put the COVID-19 pandemic behind us, and go back to kissing ca- sual acquaintances (on the cheek at least) and jamming ourselves like sar- dines into trams and trains in cities from New York to Tokyo. There is little doubt that, in eco- nomic terms, the first-order conse- quences of a return to normal social interactions will be positive. Re- searchers at the Bank for Interna- tional Settlements (BIS) estimate that the pandemic caused an 8% output loss in developed countries in 2020, and project a further decline of just over 2% this year. Relaxation of travel and other restrictions should deliver a powerful recovery in 2022, although its extent will vary greatly across countries depending on infec- tion and vaccination rates. And, of course, a general upsurge in infec- tions or reinfections could produce a third wave of economic pain if fur- ther restrictions on activity were re- quired. Moreover, not all of Pandexit’s eco- nomic benefits will be unalloyed. Central bankers, who are skilled at turning opportunities into problems, are already worrying. While their baseline economic scenario is posi- tive, they see significant risks. “Poli- cymakers still face daunting challenges,” the general manager of the BIS, Agustín Carstens, said re- cently. “Public and private debt are very high, and the pandemic’s ad- verse legacies are large” Augustine dded. Carstens’ key point is that the eco- nomic damage created by COVID- 19 has been mitigated by “unprecedented macroeconomic policy accommodation”: very low interest rates and massive doses of quantitative easing, along with “ample” fiscal support. The degree of ISSUE 153 SEPTEMBER 2021 the BANKING EXECUTIVE 9