World – Macro-economic Scenario 2023-2024 : an unprecedented reversal
- 2022.19.12
- 2
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- An unprecedented reversal
- Focus Geopolitics - The reality? Trench warfare in Europe
- Developed countries
- Emerging countries
- Sectors
- Markets
- Economic & financial forecasts
In summary
Inflation has taken solid hold – both demand-side and supply-side; both surging inflation and inflation that just edged up slightly due to the shock of the war in Ukraine. Monetary tightening is stinging – whether it is aggressive and almost complete, or more hesitant and limited. The powerful mainsprings of the post-Covid recovery are relaxing, and economies – at varying degrees of proximity – are getting ready to tangle with recession. Inflation has yet to surrender; monetary policy is set on combating it, and the recession is in focus. These are the key components in the interest rate scenario.
In the Eurozone, the natural collapse of growth in the wake of the pandemic has been joined by the new, longer-term shock of the war in Ukraine. The shocks are coming in rapid succession, with the tracks of the past (temporary) shock overlaid by the effects of the new (more permanent) shock, and they have made the economic cycle harder to read. What are we inheriting from the pandemic? A still-solid labour market; a savings surplus that is substantial, but that has already been tapped by the lowest-income households; and inflation that we were hoping was temporary. With the debate still open as to the exact nature of inflation and how much blame to assign supply or demand, there is no denying that supply chain tensions are easing and a moderation of global inflation is spreading, but the second-round effects are visible. Energy price increases are clearly being passed on through production costs, even before any price-wage loop is singled out as the cause.
Catherine LEBOUGRE, Economist