NATIXIS -2020 Universal Registration Document

4 OVERVIEW OF THE FISCAL YEAR Significant events for 2020

Significant events for 2020 4.1

However, Europe and the United States faced a second wave of new cases in the autumn. Mobility and activity restrictionswere gradually reintroducedin most countries, thereby affecting business. However, business losses in the fourth quarter will be much smaller than those recorded in the second quarter, as governments have attempted to minimize the economic impact of the restrictions imposed. As a result, growth was almost stable in Germany in the fourth quarter, while the decline in France would be limited to 1.3% based on the latest INSEE estimate. On a full-year basis, the euro zone’s GDP fell by 6.8% with a decrease of 8.3% for France. In Europe, partial unemployment schemes continued in the fourth quarter, thereby mitigating the impact on household income and job losses. After a window-dressing fall in the second quarter, unemployment rates rose in the third quarter in the euro zone, increasing from 7.2% in February to 8.3% in December. In France, the increase was 8.9% in December according to Eurostat, i.e. 1.4 points more than in February 2020. In the United States, after an impressive increase between February and April when it reached 14.7%, the unemployment rate gradually fell in the second half of the year, from 11.1% in June to 6.7% in December. Nevertheless, the US labor market started to slow at the end of the year. During the second half of the year, monetary policies remained very accommodative.In the United States, the Fed maintainedthe pace of its asset purchases ($80 billion per month in purchases of treasury securities and $40 billion in agency covered bonds). It maintained its key rates at zero. In Europe, the ECB eased the level of monetary accommodation several times over. After setting up the PEPP (Pandemic Emergency Purchase Program) in the first half of 2020, with an initial budget of €750 billion, the size of the program was increased twice (+€600 billion in June and +€500 billion in December) with purchases that will be extended until the end of 2022. Accordingly, the PEPP’s budget is €1,850 billion, of which around €700 billion were used at the end of 2020. In addition, the conditions of the TLTRO III have been eased, leading to an extension of the access period to subsidized financing conditions (up to -100bp) until June 2022. Finally, the ECB kept its main key rates unchanged. However, 2020 ended with two pieces of good news: the arrival of vaccines against COVID-19 which are a real glimmer of hope and the conclusion at the last minute by European Heads of State of a trade agreement on post-Brexit relations.

Macro-economic context 4.1.1 Growth and monetary policies 4.1.1.1 2020 will have been an unprecedented year in modern history, with the COVID-19 pandemic causing the most severe post-war global recessionand simultaneouslyhitting the largest number of countries since the 1870s (according to the World Bank). Both global growth and monetary policies were deeply affected by the health crisis in 2020. In the first half of 2020 , the COVID-19 crisis plunged the global economy into a recession of unprecedented magnitude and deep uncertainty. From March onwards, most countries imposed more or less strict lockdown measures, which resulted in a sharp drop in activity and a collapse in global trade. The figures for the first quarter gave the first glimpse of the shock. In China, where the epidemic originated, GDP plummeted 9.8% in the first quarter. The euro zone lost 3.8%, the UK 2.2% and the US 1.2% (5% at an annualized rate). The second quarter saw much sharper falls (around 12% in the euro zone) in a context of generalized confinement. In this context, central banks acted swiftly and vigorously to deploy an arsenal of both conventional and unconventional measures to limit liquidity risk and avoid the price of certain assets, and especially corporate debt, from going into freefall. Several banks thus lowered their key rates, reinstated or ramped up their asset purchase programs to maintain long rates at a low level, and strengthened their currency swap agreements to ease dollar funding stress. In the first half, the Fed extended the range of securities eligible under its asset-purchase program to include corporate bonds with a view to support small and medium-sized businesses, buying up to 95% of eligible loans granted by banks (the Main Street Lending Program). For its part, the ECB also strengthened the Pandemic Emergency Purchase Program (PEPP), initially set up for a total amount of €750 billion, to which was added an additional €600 billion. In addition to the easing of the targeted longer-term refinancing operations (TLTRO III) conditions, as already decided on, the ECB added a new instrument– PandemicEmergencyLong-Term Refinancing Operations (PELTRO) – to avoid liquidity issues in the financial system. The purchase program eligibility conditions for market assets were also loosened. After the record drop in activity in the first half of the year, business in the second half of 2020 experienced upward and downward trends. The gradual lifting of lockdowns and mobility restrictions at the end of the spring automatically resulted in a sharp improvement in global activity in the third quarter and of an exceptional scale. In China, GDP increased by 4.9% in the third quarter while the increase reached 5.3% in Japan, 7.5% in the United States, 12.5% in the euro zone and 16% in the United Kingdom. France recorded the strongest improvement, posting quarterly growth of 18.7%.

226

NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020