• The pandemic casts a shadow over interest rates ... 34 countries dealing with zero interest or near it


    The Corona pandemic has caused an increase in the number of countries that deal with or near zero interest, as central banks seek to protect their economies from the repercussions of the epidemic that caused the closure of economies and the stagnation of global trade movement, through more financial support and an accommodative monetary policy that is expected to continue for a long time.
    According to the analysis of the unit of reports in Al-Eqtisadiah newspaper, based on data from the International Monetary Fund and the World Bank, about 34 countries around the world operate at zero interest rates or near them (0 to 25 basis points), with the most prominent of which are the eurozone countries, as well as Singapore, the United Kingdom and all From Canada and USA.
    In the United Kingdom, the central bank lowered interest rates to the lowest historical level, reaching about 0.1 percent at the beginning of the crisis, and was not satisfied with that, as the central bank works to ensure that banks are ready for zero or negative interest rates.
    Also, three countries remained in their monetary policy on negative interest rates, namely Japan, Denmark and Switzerland at rates of -0.1 percent, -0.6 percent, and -0.75 percent, respectively.
    In the United States of America, the central bank's interest rate is close to zero and is expected to remain in this region until 2024, and the federal funds rate was hovering around 1.5 percent in late 2019 after three interest rate cuts during the second half of last year.​

    Countries resort to applying zero or negative interest in the event that the economy is exposed to an economic recession or weak economic growth rates, in order to push depositors to withdraw their money or part of it and pump it into the economy, since its deposits in the bank will be reduced, given that the bank will take interest on it instead of The customer gives, as well as the generally low interest, encourages individuals and firms to borrow to increase their investment.
    The increase in borrowing and withdrawing part of the deposits from banks leads to their investment in the economy, thus spinning the wheel of production, increasing investments and economic activity, thus increasing economic growth as a final result, which in turn leads to job creation and lower unemployment rates.
    The pandemic caused a decline in global GDP, as the International Monetary Fund expected it to decline this year by about 4.4 percent, with its expectation to record growth of about 5.2 percent for the next year, and since interest rates were low before the pandemic, this led to a deeper economic recession.
    Central banks are working quickly to confront this crisis through unprecedented measures, including lowering interest rates, interfering in foreign exchange markets, in addition to reducing the requirements for mandatory reserves at banks, which provides liquidity to the financial system and eases the severity of credit conditions​.
    Despite the decline in interest rates around the world, three countries around the world have been monitored that the interest rate has exceeded the 30% level, led by Venezuela at 38.7%, then Argentina at 36% and Zimbabwe at an interest rate of approximately 35%, while we find many countries exceeded The interest level is 10%, of which Iran is 18%, and Turkey is 10.25%.

    Economic Reports Unit​​

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