The chaos caused by Russia’s invasion of Ukraine was the final straw that drowned the world’s post-COVID recovery.
The year 2022 has weakened the health of the global economy, mainly due to the war unleashed by Putin against Ukraine. The chaos caused by the Russian invasion was the last straw that drowned the world’s post-COVID recovery. What does the global economy now expect from 2023?
Very negative view
“When 2023 approaches, more forecasts that it will be the third anti-rating of the 21st century. It was worse only in 2020, when the pandemic began, and in 2009, after the global financial crisis,” they said then. the New Year economists at Deutsche Bank.
In both 2009 and 2020, the world fell into recession. Economists call recessions periods of six months or more in which an increase in wealth, production and business activity in the economy is replaced by recession.
People get poorer, businesses go bankrupt, social spending shrinks, infrastructure breaks down, and future investments – education, manufacturing, technology – come to nothing.
West will be bad
“The United States and Europe are decelerating rapidly, and three-quarters of economic growth in 2023 will be provided by the developing economies of Asia,” the economists of the OECD club of rich countries painted a bleak picture of the coming year for the West. .
For at least the past half century, advanced economies have fallen into recession only when spending on their main import, energy, has increased. The only exception is the 2020 recession caused by the pandemic.
At this time all the conditions are created. So far, the decline has occurred after spending on electricity, fuel and heat reached 13% of GDP. Last year 2022, they exceeded 17%.
The rise in energy prices is a direct result of Russia’s aggression as the West imposed sanctions on oil and coal from Russia and the Kremlin cut gas supplies to the EU.
As a result, Europe is more at risk than others of not only surviving a technical recession (a contraction for two quarters in a row this winter), but also ending the entire year 2023 in the red, says of the majority of economists polled by the FT newspaper.
The US as the world’s leading producer of oil and gas is in a better position than the EU, which is 60% dependent on imports. The government and central bank of the world’s largest economy have said it will avoid a recession. Experts estimate its probability at 70%, showed a December poll by Bloomberg.
Political factors
Forecasts of a moderate recession in the West and a sluggish global recovery run the risk of being overly optimistic. Among the main threats, economists name three.
First, China, which suddenly reopened after almost three years of quarantine, is experiencing a wave of covid, the consequences of which are not yet obvious. If it subsides in the spring, the demand for energy resources from China will grow, and the world will face a new phase of energy crisis and inflation.
Second, the likely escalation of Russia’s war against Ukraine is fraught with delays in grain exports and rising food prices.
The second wave of inflation caused by these two factors will prevent central banks from raising lending rates. This is the third time.
An increase in the price of money will accelerate economic recession and lead to problems in the financial sector, as it will be more difficult for debtors to meet their obligations.
In past crises and pandemics, the world has struggled with debt. As a result, countries, businesses and citizens have accumulated a record $235 trillion in debt, according to the IMF. Or more, according to the calculations of the world’s leading association of the financial industry Institute of International Finance (IIF).
In addition to simply unpleasant, there are also apocalyptic situations. Most forecasts in this category boil down to two scenarios: the escalation of Russian aggression, including nuclear war, and China’s attack on Taiwan, with subsequent conflict with the West.
“The consequences of the economic war between China and the West will be many times more serious than Russia’s attack on Ukraine,” wrote experts at the British CEBR center. round of inflation.”
But there are also optimistic situations where recession can be avoided and most problems can be solved.
One involves ending Russia’s aggression against Ukraine. The withdrawal of troops and reparations will allow to start negotiations on the lifting of sanctions from the Kremlin. Even lower are the chances of a new technological breakthrough comparable to the invention of the Internet, which gave the world decades of growth. So far, progress has been modest. Covid has given impetus to remote work and the digitization of the workflow in maritime trade, while the gas crisis has prompted energy conservation. But the real victories lie ahead.
Source: korrespondent
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.