Soaring prices, war, rate hikes, global warming… Expected to be in good shape in 2022, the world economy has finally suffered a succession of crises aggravated by the Russian invasion of Ukraine, suggesting a dark year 2023.
2022 will remain the year of “polycrises”, according to the expression popularized by historian Adam Tooze: heterogeneous shocks which interact, making the whole overwhelming. These shocks “have increased since the beginning of the century”, with the financial crisis of 2008, that of sovereign debt, the pandemic, the energy crisis, underlines Roel Beetsma, professor of economics at the University of Amsterdam. For him, the world “has not experienced such a complicated situation since the Second World War”.
Persistent inflation
After years of sluggishness, its return was to be temporary, concomitant with the post-pandemic relaunch, the experts said in unison a year ago. The Russian invasion of Ukraine and the energy boom have reshuffled the cards. Unmatched since the 1970s and 80s, inflation is pushing millions of households in developed countries into precariousness and threatening those in poor countries with increased misery. However, it has started to slow, to 10% in November in the euro zone and to 6% in October in the United States.
Inflation is expected to reach 8% in the fourth quarter in the major developed and emerging countries of the G20, before falling to 5.5% in 2023 and 2024, according to the Organization for Economic Co-operation and Development (OECD), which recommends, to get out of it, more targeted aid. In particular in France and Germany, which, like others, had to reopen the checkbook to help households and businesses. In the European Union alone, 674 billion euros have been promised to them since September 2021, according to the Bruegel think tank. Including 264 billion for Germany, where one in two people say they now only buy what is strictly necessary, in a survey by the firm EY.
“Everything has become more expensive, between fresh cream, wine, electricity,” lists Nicole Eisermann, who runs a stand on the Christmas market in Frankfurt. “I’ll be careful, but I have a lot of children and grandchildren” who want gifts, smiles further one of the customers, Günther Blum.
Central banks tougher
Primarily mandated to preserve price stability, central bankers have almost all resumed the path of interest rate hikes. But this strategy weighs down the economy a little more by making borrowing conditions for households and businesses more expensive. Ditto for the States, more indebted since the financial crisis and the pandemic, and for some now threatened with instability, or even default.
A ray of hope came from the United States: Jerome Powell, the head of the Federal Reserve (Fed), declared that its rates could be raised less sharply in December, while warning however that they could remain high “for some time “. The European Central Bank, it sees itself still far from the point of arrival, without advancing for 2023: a new increase in December is acquired, but probably less strong than in October.
Recessions and a climate crisis on the horizon
The planet is still far from generalized recession next year: the IMF still forecasts 2.7% growth and the OECD 2.2%. But the UK has already said it is “in recession”, and many economists believe that Germany and Italy will follow. For the euro zone as a whole, the rating agency S&P Global expects a particularly difficult first quarter and stagnation over the year. A further deterioration in the outlook after those announced throughout 2022.
At the same time, the Chinese locomotive is running out of steam: consumption and manufacturing production there have suffered from the strategy to combat Covid, and exports are weighed down by the global slowdown. Hope is emerging, however: the announcement yesterday of a general easing of health rules against Covid-19 in China, to appease popular anger and recover its faltering economy.
“The United States is suffering from a classic overheating problem that should resolve itself”, on the other hand “Europe’s energy reconfiguration will take years”, writes S&P Global. But “the worst crisis, which is taking place in slow motion, is the climate crisis,” says Roel Beetsma.
Faced with the multiplication of disasters, ambitions remain too timid, like COP27 which failed to set new targets for reducing greenhouse gas emissions. The difficulty of States to manage soaring energy prices
was also reflected in their slow transition. “If we don’t do enough, it will hit us on a scale never seen before,” thinks Roel Beetsma.
Ali BEKHTAOUI and Mathilde DUMAZET, with Jean-Philippe LACOUR in Frankfurt/AFP
Soaring prices, war, rate hikes, global warming… Expected to be in good shape in 2022, the world economy has finally suffered a succession of crises aggravated by the Russian invasion of Ukraine, suggesting a dark year 2023. 2022 will remain the year of “polycrises”, according to the expression popularized by the historian Adam Tooze: shocks…