The phenomenon of economic growth engines slowing down is not new. 2012 was the last time we saw something comparable. Growth really worried the government then. So, what makes this time different?
Slowdowns at the beginning of a government’s term can truly shake up their finances. It can disrupt revenues, slow down public investment, and devastate sentiment. The last thing seems to be happening already. But the first two can be preempted.
The government seems to be hanging in on that premise. This is upsetting investors even more. When we juxtapose government optimism and public confidence, the gap is too wide for comfort. This puts the government in an unenviable position. It has to ensure its optimism is wellfounded. It also has to mend sentiment. And, there is little time to do it – the next budget will be presented just six months from now.
By then, we need to move fast. Given the timelines, the government has little choice. Yet, the market doesn’t see it that way.
What should we be doing? We should carefully observe every aspect and look for big signals. This phase is an opportunity to move ahead of the market. And, if we show early conviction on a correct call, the rewards can be very significant.
