The last decade has gotten us used to the fact that the greatest economic impacts are determined by factors that are not strictly economic in nature, whether they are protectionist policies, the covid or, now, the war between Russia and Ukraine, which has deteriorated the global outlook and added uncertainty in a context of strong inflationary pressures.
The sanctions on Russia approved after the invasion of Ukraine generated from the beginning an increase in financial volatility and a sharp increase in the price of raw materials, especially energy. Although financial stress has eased in recent weeks – once it became clear that the conflict would not spread to other areas – and oil and natural gas prices have moderated from their highs in March, they remain very high levels and represent a significant supply shock for the global economy, especially Europe, whose growth could fall by 3 points from 2021 to 2% in 2022 and 1.8% in 2023.
In the rest of the world, forecasts are more affected by other factors. In the case of China, the resurgence of the pandemic and the maintenance of its policy of zero tolerance towards the disease puts a clear downward bias in the growth forecast for this year, of around 5%. In the United States, the economic outlook is going to be more determined by economic policy and the fight against inflation than by the collateral effects of the sanctions on Russia, which only affect it to the extent that they add more inflationary pressure to an already overheated economy. . The American Federal Reserve (Fed) already changed gears at the end of 2021, has begun to raise interest rates and will continue to do so in 2022 and 2023, while beginning to reduce its gigantic balance of bonds accumulated in recent years . On the other hand, the approval of a final fiscal package by Congress seems ruled out, which suggests a strong slowdown for this year, up to 3.1%.
The risks in this scenario, derived from the difficulty of responding to new supply shocks, are high. The Fed could go over the brakes and cause a recession in the United States, but it could also fail in its attempt to control inflation expectations; China could slow down more than expected if it does not control the pandemic well or if, to achieve it, it does not give up its policy of COVID zero. And Europe may also face stagflation if the war in the East escalates. In all these cases there would be important global repercussions.
He knows in depth all the sides of the coin.
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