Pandemic first. Then the supply crisis. And this year war. Economic activity has not been the same since the global crisis that began almost three years ago. Europe had to face a disturbing reality: its international position is very vulnerable to foreign actors. At best, they are simple competitors with occasional deals with the Old Continent; at worst, they are real competitors.
The imbalance between supply and demand following the reopening of economies, along with the complex international context created by the war, meant that most growth plans and prospects had to be scrapped. The word “uncertainty” has rarely been the subject of so many headlines. 2023 prospects continue to be marked by suspicions and fears of recession or stagflation.
SPANISH NEWSPAPERThe Prensa Ibérica group organized a conference to shed light on the future of the country’s economy. under the title Prospects 2023: Challenges in the economic keyThe meeting held at Espacio Bertelsmann in Madrid, sponsored by CaixaBank, featured the voices of leading economists trying to keep their finger on the pulse of the main coordinates.
Increase
Cooling, but not stagnation. This is the general idea that came out of the panel of experts held at the meeting. “The future is less encouraging than what we’ve been through. We started to see the slowdown in the economy in the third quarter and it will continue in the coming quarters,” he said. Luciana Taft, Economics and Markets advisor to the International Financial Analysts (AFI). We expect an average of 1 percent growth for Spain next year,” he said. Jose Ramon DiezDirector of Economics and International Markets at CaixaBank Research.
The panel of experts nevertheless stressed the need to be careful. “The Spanish economy is the worst recovering. “All but ours have returned to pre-Covid levels,” he said. pablo gil gomez, economist, Finance and Markets specialist and principal analyst for XTB Spain and Latin America. “The consumer confidence index has dropped 24 points and the outlook is not good. “There will be high inflation for a long time,” he said. Juan Carlos Higueraseconomic and financial analyst and professor at EAE Business School.
Inflation
The main problem facing the economy and causing headaches for governments is, supply crisisEnergy products, in particular, caused a chain reaction of price increases in all markets, raising the question of inflation in a stagnant European economy after years of low CPI levels and interest rates at 0%.
“Imbalance between supply and demand in the last 24 months explains a good part of the rise in prices. This mismatch is starting to clear up,” Díez said. “Prices are not falling, they are accumulating. “Low inflation will be maintained over the next two years,” Higueras said.
Pablo Gil stated that we have created an “inflation monster” and we will experience the consequences of this throughout the next year and said, “The problem of 2023 is not what will happen, but what we have done so far. We had five glasses of tequila.”.
During this year, the central banks of the world’s major economies took important steps. interest increases as a way to contain runaway inflation. Supervisors try to cool the economy and lower prices by making the price of money and thus financing more expensive. This is called monetary policy.
However, other economic policy that can help control prices is fiscal policy undertaken by governments through transfers and increases or reductions in taxes. “As the only soldiers on the front line in the fight against inflation, why do we have to leave the ECB? Fiscal policy remains expansionary”, stressed Rafael PampillonProfessor Emeritus of Applied Economics at CEU-San Pablo University and professor at IE Business School. “This fiscal surplus needs to be rolled back next year,” Taft backed. “The more fiscal policy you do for me, the more monetary policy I will do. “The extreme example is the UK,” said the AFI expert.
Work
The biggest fear of inflation is that it will lead to a prolonged economic recession. “We have central banks built with the obligation to avoid recession at all costs; recessions are cyclicalGil denounced. However, the situation does not seem so alarming at the moment. “A recession occurs when many industries experience a general decline with long-term job losses. No jobs no recession”, explained José Ramón Díez. CaixaBank expert pointed out that with 1% growth, there will be no job loss, instead we will “stay steady”. “The structure of the labor market is completely different; What we’re starting to detect in Spain is the need for professionals who can’t be found,” he added.
In a recession, experts are also optimistic. “The job market will suffer, but that will be a consequence of the current situation,” Gil said. said. “Employment is always a lagging variable because the last thing you do is fire peopleTaft made sense.
Even if employment is maintained, a serious concern for citizens is the gap between wages and cost of living. “We continue to have this kind of insecure work not allowing families to decide for the future. If you add inflation to this, the pockets of consumers will be empty,” he said.
On the other hand, Pampillón reflected on the differentiation of the labor market. There are currently almost three million registered unemployed; however, many companies are struggling to find a workforce. “Changes must be made in education to adapt to the labor market.”, he assured.
Debt
In addition to the phantom developments at the foot of many highways, the main legacy of the financial crisis of more than a decade ago is the massive public debt that the State has not been able to alleviate. Currently, it represents 116% of GDP. “Each citizen owes about 83,000 euros”, illustrated Higueras.
A figure that continues to gain weight as governments fail to close the €82,000m gap in 2021. “How alarming is it? To the point where the ECB buys or doesn’t,” Pampillón mocked. “Both this and previous governments, they are used to spending more than they earnGil pointed.
A recession situation with such high debt levels and where Administrations are financially exhausted after implementing coronavirus containment measures can be dangerous. Especially as investor trends change. “We will enter a very different financial environment in the coming years. Markets want tighter policy”, guessed José Ramón Díez.
“The debt is oursGil said. “And our children, our great-grandchildren and great-grandchildren. It seems like you never have to pay for it,” Higueras added. Gil added, “I wonder if we live beyond our means in a world where global debt currently accounts for 350% of the planet’s GDP.”
Public debt faces its lowest hours, while private debt is at its peak. “The private debt of companies and families has decreased by an extraordinary 20-30 percentage points of GDP. And we, not counting this year, ten years with current account surplus”Diez explained. “A tough year is coming. However, the increase in mortgage payment interests keeps families in good shape. On the other hand, we don’t have big balloons that cause instability as in the past,” he said.
fast recovery
The event held at Espacio Bertelsmann, Elena ApariciAt the closing of the meeting, General Director of Economic Policy of the Ministry of Economy and Digital Transformation, Dr.
After the onset of the health crisis caused by the coronavirus, the community club created a “European” Marshall plan to modernize two key areas of the economy: digitization and ecological transition. The aim is to guarantee the technological and energy dominance of the continent. Spain corresponds to 140,000 million euros. New Generation Fundsone part is divided into non-refundable transfers, the other into credits.
“The direct measures of the pandemic have a short-term effect. Again, imbalances will be eliminated with structural reforms”, pointed Aparici. To gain European approval, Moncloa presented its Plan for Recovery, Transformation and Resilience, a strategy that will transform the Spanish economy. “We knew the levers to tap: improving productivity, human capital, social capital and business dynamism,” he said.
Aparıcı explained the government’s concern about core inflation as follows:Takes the weight off Energy. We hope that raw material prices will continue to fall and inflation will be brought back,” he said.
Considering that Spain’s recovery has been slow compared to its partners, the managing director pointed out that the focus should be on the long-term: “Attention was drawn to the need for rapid recovery and transforming the economy. All structural reforms aim to correct macroeconomic risks and maintain competitiveness.”
Aparici gave an example of the strong dynamism of the labor market: “More than 20 million employed workers, 23 million active and We lowered the 3 million threshold unemployed. The youth unemployment rate remains at a minimum.
Head of Economic Policy of the Ministry, among investment plans, los PERTE is a useful tool mobilizing public and private resources that promote the modernization of the economy: “We have great infrastructures, but we need to support everything else to digitize the economy”.