Connect with us

Markets in a Minute

Visualizing Interest Rates by Country in 2021

Published

on

Interest Rates by Country

Interest Rates by Country

Visualizing Interest Rates by Country in 2021

Going as far back as the 14th century, pandemics have been found to have a negative effect on interest rates.

History shows that this effect is even greater than that of financial crises. Across a study of 19 pandemics since the mid-1300s, real interest rates fell an average of 1.5 percentage points lower in the following two decades than they would have otherwise. And yet, even before COVID-19, structural forces, such as rising debt, were causing interest rates to fall.

The above Markets in a Minute chart from New York Life Investments shows interest rates by country in 2021.

How Have Interest Rates Changed?

Broadly speaking, the majority of countries’ short-term interest rates have declined since COVID-19 began. Using data from CEIC as of April 2021, short-term interest rates are measured by three-month money market rates where available.

Interest rate change Apr 2020 – Mar 2021

  • Interest rates fell: 69 countries
  • Interest rates increased: 10 countries
  • Interest rates stayed the same: 3 countries

Across nearly every continent, interest rates have decreased as central banks enacted measures to combat the economic fallout of COVID-19.

Country/ RegionShort-Term Interest Rate Mar 2021 (%)*Short-Term Interest Rate Apr 2020 (%)**Interest Rate Change 2020-2021 (%)
Argentina3112.418.6
Australia0.00.1-0.1
Austria-0.5-0.3-0.2
Bangladesh0.77.1-6.4
Belarus13.910.63.3
Belgium-0.5-0.3-0.2
Bolivia11.58.62.9
Botswana3.54.4-0.9
Cambodia1.81.60.2
Canada0.10.3-0.2
China2.61.41.2
Colombia1.84.6-2.8
Costa Rica3.64.1-0.5
Cyprus-0.5-0.3-0.2
Czech Republic0.40.9-0.5
Denmark-0.2-0.40.2
Ecuador1.01.3-0.3
Egypt9.99.60.3
Estonia-0.5-0.3-0.2
Finland-0.5-0.3-0.2
France-0.5-0.3-0.2
Georgia8.09.0-1.0
Germany-0.5-0.3-0.2
Greece-0.5-0.3-0.2
Hong Kong0.21.7-1.5
Hungary0.81.1-0.3
Iceland1.42.4-1.0
India3.75.3-1.6
Indonesia3.84.9-1.1
Ireland-0.5-0.3-0.2
Israel-0.10.1-0.2
Italy-0.5-0.3-0.2
Japan-0.10.1-0.2
Jordan4.64.7-0.1
Kenya6.97.2-0.3
Kosovo-0.5-0.3-0.2
Kuwait1.51.8-0.3
Latvia-0.5-0.3-0.2
Lithuania-0.5-0.3-0.2
Luxembourg-0.5-0.3-0.2
Macau SAR0.31.7-1.4
Malaysia1.92.8-0.9
Malta-0.5-0.3-0.2
Mauritius0.11.2-1.1
Mexico4.26.2-2.0
Moldova7.08.0-1.0
Montenegro-0.5-0.3-0.2
Morocco1.52.0-0.5
Mozambique13.310.03.3
Nepal1.12.1-1.0
Netherlands-0.5-0.3-0.2
New Zealand0.30.30.0
Nigeria6.910.1-3.2
Norway0.41.4-1.0
Pakistan7.68.2-0.6
Panama0.20.7-0.5
Philippines1.23.2-2.0
Poland0.20.7-0.5
Portugal-0.5-0.3-0.2
Qatar1.11.10.0
Romania1.72.5-0.8
Russia4.76.7-2.0
Saudi Arabia0.81.2-0.4
Serbia0.91.2-0.3
Singapore0.40.9-0.5
Slovakia-0.5-0.3-0.2
Slovenia-0.5-0.3-0.2
South Africa3.84.2-0.4
South Korea0.81.0-0.2
Spain-0.5-0.3-0.2
Sweden-0.20.3-0.5
Switzerland-0.8-0.7-0.1
Taiwan0.50.50.0
Thailand0.60.9-0.3
Turkey208.411.6
UAE0.31.9-1.6
United Kingdom0.10.6-0.5
United States0.00.1-0.1
Uruguay5.010.1-5.1
Venezuela73.823.550.3
Vietnam1.74.2-2.5
Zambia14.016.5-2.5

Source: CEIC (Apr, 2021)
*Bolivia, Botswana, Costa Rica, Japan, Mauritius, Nepal, Qatar, Russia, Slovakia, Zambia have most recent data as of Feb ’21
**Costa Rica, Denmark, Mauritius, Norway & Russia have 2020 data as of Mar 2020

In the U.S., interest rates fell to record lows, dropping by 0.1 percentage points between April 2020 and March 2021. As vaccine rollouts accelerated in 2021, real GDP grew by an annual rate of 6.4% in the first quarter. Unemployment slightly improved to 6.1%, but still remains well above pre-pandemic levels of 3.5%.

Given these variables, the question of whether interest rates will rise is an open one.

Like the U.S., interest rates in the European Union declined, although at a greater rate—from -0.3% to -0.5%. To help improve economic conditions, the European Central Bank promises to purchase $2.2 trillion in government bonds until March 2022.

Together, the euro area, the U.S., Japan, and Britain have produced at least $3.8 trillion in new money supply since early 2020.

Interest Rates: The Steepest Gains and Declines

As money creation and low interest rates have become increasingly common phenomena, the focus has shifted to inflation.

With interest rates reaching 343% in 2020, Venezuela has been a poster child for hyperinflationary forces. Energy shortages only compounded the effect which was well underway before the pandemic. Between April 2020 and March 2021, interest rates jumped over 50 percentage points.

In addition, Turkey and Brazil raised interest rates in March 2021 to dampen inflation. Interest rates in Turkey have increased 11.6 percentage points over the time frame, one of the highest absolute changes globally.

In 2020, the lira faced historic declines, causing the price of imports to climb significantly.

Interest Rates by Country

On the other hand, Bangladesh has seen its interest rates decline 6.4 percentage points, the steepest drop across the dataset. To help offset the effects of COVID-19, the Bangladesh Bank lowered interest rates from 7.1% to 0.7%.

With rates falling 3.2 percentage points, Nigeria has also seen one of the greatest interest rate drops. In March, Fitch Ratings gave the country a B rating with a stable outlook, supported by its low government debt-to-GDP ratio and large economy.

Research has found that countries with better credit ratings and transparent fiscal infrastructure had greater ability for central banks to lower interest rates in response to the crisis.

Sign of the Times

Policy rate changes, a key central bank maneuver, have been an important tool in response to COVID-19.

As economic activity in some countries picks up, interest rates could rise. However, progress in vaccination distribution remains uncertain, especially in emerging markets.

In tandem with this, global central banks are applying unproven monetary policy frameworks, including money creation and large-scale bond purchases. While studies show that interest rates have been falling over the past several centuries, the confluence of these factors will be revealing in the years that follow.

Advisor channel footer

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
Comments

Markets in a Minute

Data Centers: Investing in the Infrastructure of the Future

Infrastructure refers to any asset that provides an essential service. In today’s interconnected world, data centers are exactly that.

Published

on

Data Centers

This infographic is available as a poster.

Data Centers: Investing in the Infrastructure of the Future

Digital transformation is one of the world’s most prominent trends today.

For evidence, consider the growth in internet users worldwide. By 2023, 5.3 billion people (66% of population) will be using the internet, up from 3.9 billion (51% of population) in 2018.

This growth has resulted in an incredible amount of data being produced each day, whether its from streaming music on Spotify or buying goods on Amazon. But how is all this data being processed?

In this Markets in a Minute chart from New York Life Investments, we shed light on the importance of data centers, and why they should be considered as core infrastructure.

The Role of the Data Center

A data center is a facility that stores, processes, and disseminates data. There are thousands of them around the world, and collectively, they’re referred to as the “cloud”.

This puts data centers at the center of nearly everything we do online: e-commerce, communications, storage and back-up, and even online gaming. To gain a better sense of what this all looks like, the following table breaks down the storage capacity of the world’s data centers.

Segment2016 Storage Capacity (exabytes)2021 Storage Capacity (exabytes) 
Compute160470
Collaboration170400
Database & analytics150380
Enterprise resource planning180420
Video streaming50180
Social networking60160
Search engine30100
Other consumer apps70190
Total8702,300

Source: Statista (2021)

One exabyte is equal to one billion gigabytes, which means the world currently has 2.3 trillion gigabytes of total storage.

The largest segment is compute instances, which are cloud-based workstations used by data scientists. At the lower end of the scale are segments like video streaming (includes Netflix and Hulu) and social networking (think Facebook or LinkedIn).

Cloud Spending Reaches a Historic Milestone

For businesses that create and use data, moving to the cloud (as opposed to maintaining their own servers) has plenty of advantages like cost savings, flexibility, and security.

This is driving exponential growth in cloud infrastructure spending, which reached a record $130 billion in 2020. At the same time, spending on data center hardware decreased from $96 to $90 billion. These results are partly attributed to COVID-19, which forced many businesses to switch to a work-from-home operating model.

A survey conducted by 451 Research found that 40% of businesses had increased their usage of cloud services during the pandemic. In addition, 85% of those who were impacted indicated that the move would be a permanent one.

Data Centers are Infrastrcture

The scope of an infrastructure investor has historically been limited to companies in construction, energy, and transportation.

But what defines infrastructure?

It’s any physical system that is vital for an economy’s development and prosperity—and in a world where over 5 billion people are expected to be online by 2023, the data center is the perfect embodiment of that.

Advisor channel footer

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Markets in a Minute

Sustainable Investing Assets Worldwide (2018-2020)

From 2018-2020, global sustainable investing assets grew by 15% to reach $35.3 trillion. Here’s how they break down across five major markets.

Published

on

Sustainable Investing

This infographic is available as a poster.

Sustainable Investing Assets Worldwide (2018-2020)

Sustainable investing is top-of-mind for many investors, but how fast is it actually growing?

Between 2018 and 2020, global sustainable investing assets grew 15% to reach $35.3 trillion. This works out to more than a third of total assets under management.

In this Markets in a Minute from New York Life Investments, we explore the value and growth of sustainable investing assets across five major markets.

What is Sustainable Investing?

Sustainable investing considers environmental, social, and governance (ESG) factors in portfolio selection and management. For the purposes of this data, it is a broad definition that includes seven main approaches:

  • ESG integration
  • Corporate engagement & shareholder action
  • Norms-based screening
  • Negative/exclusionary screening
  • Best-in-class/positive screening
  • Sustainability themed/thematic investing
  • Impact and community investing

In most regions, it is becoming increasingly common to combine several of the above strategies within the same product.

Sustainable Investing Assets by Region

Sustainable investment data comes from five major markets: the U.S., Europe, Japan, Canada, and Australasia. Currencies have been converted to U.S. dollars at the prevailing exchange rate at the day of reporting. We’ve based growth rates on U.S. dollar values.

Here is the value of sustainable investing assets in U.S dollars, sorted by asset amounts in 2020.

Region20182020Growth Rate
United States$12.0T$17.1T42%
Europe$14.1T$12.0T-15%
Japan$2.2T$2.9T32%
Canada$1.7T$2.4T43%
Australasia$734B$906B23%

All 2020 assets are reported as of December 31, 2019 except for Japan which reports as of March 31, 2020. Australasia is Australia and New Zealand. In 2020, Europe includes: Austria, Belgium, Bulgaria, Denmark, France, Germany, Greece, Italy, Spain, Netherlands, Poland, Portugal, Slovenia, Sweden, the UK, Norway, Switzerland, and Liechtenstein.

The U.S. makes up almost half of global sustainable investment assets, and saw the second highest growth rate. One strong theme in the country is racial justice investing. Over 120 investors and organizations signed a call to action for the investment community to dismantle systemic racism and promote racial equity and justice. They plan to achieve this through various actions, such as hiring people of color and financing Black entrepreneurs.

Europe makes up over a third of all sustainable investing assets. The region has seen important regulatory developments, such as:

  • Institutional investors, asset managers, and advisors must report on how they integrate sustainability risks and adverse impacts at the entity level
  • Advisors are required to ask about their clients’ ESG preferences and advise appropriate products

While Europe saw a decline in growth from 2018-2020, this is because the region has changed how they define sustainable investing. Tighter legislation means that some products that previously qualified as sustainable may not meet the new requirements. The goal of the legislation is to create clear standards for sustainable products, promoting trust and easier access for investors.

The Mounting Pressure

Globally, the proportion of sustainable investing assets is growing. In fact, sustainable investments make up 36% of global assets under management, up from 28% in 2016.

Investment professionals say the top drivers of sustainable investing are to help manage investment risks, and because clients demand it. Not only that, the recent Intergovernmental Panel on Climate Change (IPCC) report has reinforced the importance of sustainable investments.

“The climate crisis poses enormous financial risk to investment managers, asset owners and businesses….. The public and private sector must work together to ensure a just and rapid transformation to a net-zero global economy.”
António Guterres, UN Secretary-General

Advisor channel footer

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
New York Life Investments

Subscribe

Are you a financial advisor?

Subscribe here to get every update, including when new charts or infographics go live:

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular