The global economy once again faces another autumn with the fear of a slowdown in activity. According to the Organization for Economic Cooperation and Development (OECD), the abrupt rise in interest rates, the loss of consumer confidence and the delicate situation in China will mean a moderation in economic growth in 2023 and, in particular, in 2024. The euro zone will be one of the hardest hit blocs, with a meager advance of 0.6% this year and 1.1% due to the decline of its large economies. On the other hand, the Paris-based organization once again raises by two tenths, from 2.1% to 2.3%, the forecasts for 2023 for Spain, which almost multiplies by four the growth expected for the euro zone. The OECD also leaves the projections for the next year intact (1.9%) and lowers the inflation forecast for both years.
Weakness It is the new consensus word of international organizations. The world, and Europe in particular, has been able to adapt to the sanctions against Russia for the war in Ukraine. However, the economies return from the summer break suffering from the hammer blows delivered by the central banks due to rate increases in the last year and a half. Last week, the European Central Bank (ECB) made another move and raised the price of money to 4.5%, the highest rate since 2001. The actions of the world’s monetary authorities have sunk economic growth to 3 % in 2023 and 2.7% in 2024. However, the OECD notes that monetary policy should remain “restrictive” until there are clear signs of relaxation in core inflation.
Behind these two global figures there are enormous differences: India will grow above 6% and China, 4%, while Germany or Italy will close the year in the red. And yet, the rates of the two Asian powers are much lower than in other years, which adds more uncertainty to the already complicated economic outlook. “Signs of a slowdown in Chinese economic activity are also a cause for concern given the importance of China to global growth, trade and financial markets,” the document indicates. And behind the economic weakening, there is another concern that does concern central banks: the risks to financial stability. “The adverse effects of higher interest rates could prove stronger than expected, and further persistence of inflation would require additional policy adjustment that could expose financial vulnerabilities.
The OECD raises the 2023 forecasts for the United States by six tenths, which continues to endure the iron hand of its Federal Reserve. It also increases them by three tenths for 2024, when it will experience a much more discrete expansion, of 1.4%, with an average inflation of 2.6%. The euro zone has, however, entered a situation of atony, very close to stagflation. The growth of the 20 members of the single currency as a whole will be 0.6% this year – three tenths less – and 1.1% next year – four tenths less – with inflation still at 5.5% this year and 3% the one that comes.
Above the Government’s forecast
Germany continues to be the European economy—and practically the world—most affected by the energy crisis. The OECD believes that this year will close with a decline in GDP of 0.2% and inflation of 6.1%, while next year it will advance by 0.9% and the rise in prices will be 3%. Among the large countries of the euro zone, Spain is once again the country that best withstands the ECB’s shock therapy. Its growth rate will almost quadruple that of the euro zone as a whole this year. The OECD once again raises its forecast and believes that the economy will expand by 2.3% this year (the Government’s forecast is 2.1%) and 1.9% next year (the Executive believes it will be 2.4%).
Inflation will also continue to decline. It will do so at a higher rate than its partners this year (3.5%) and, on the other hand, the price increase will be higher in 2024 (3.4%, compared to 3% in the euro zone). The drop will be more drastic when looking at core inflation, that is, that which excludes the most volatile elements of the shopping basket. The OECD predicts that this will continue to be 4.4% this year but will finally drop to 3% in 2024.
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