The signs of a global recession have been visible for a long time and the highest risk is for the year 2023. Romania will not be circumvented by the global recession if the pressure on the energy market is not mitigated as soon as possible.
XTB Romania analyst Claudiu Cazacu explained in an analysis on financialintelligence.ro for some consumers and businesses “constrained by higher prices, much stricter interest rates than they were used to and lower demand, some next year may” feel “like a recession, especially given the strong recovery achieved in 2021 and first part of this year “.
“The global economy is very likely to slow down rapidly and a number of countries will go into recession, at least in the first half of next year, and some for the whole year,” the expert said.
On the other hand, the World Bank estimates that tightening monetary policy will lead to growth of the world economy by only 0.5%. Approaching the neutral line is far from comfortable.
What will happen to Romania in 2023
For XTB, our country risks “a marked slowdown in 2023, from a solid growth rate that could approach 6% until the end of this year”.
The European Commission’s summer forecast of 2.6% for the advance GDPin Romania in 2023, is faced with the need to rebalance the balance sheet burdened by higher interest rates and inflexible spending and to manage consumption eroded by inflation, in a context of declining export markets (Germany, first export destination for our country, seriously affected by crisis power).
“Under these conditions, the risk of a technical recession is high and could materialize, if the pressures on the energy market do not subside relatively quickly, in the coming months”Claudio Cazacu added.
Furthermore, according to the expert, in the short to medium term the current account deficit, which could exceed 9% of GDP this year, is a cause for concern, especially at a time when the cost of debt is at much higher levels. high compared to previous years.
What’s happening in other countries
There are also countries such as Poland, the Czech Republic, Slovakia, which have moved from a surplus to a current account deficit and whose situation is, however, relatively more favorable: the deficit could reach 5% of GDP in Poland, and the 4% of GDP in Slovakia.
As for Germany, the country is facing a price hike defined as the biggest threat to its economy, according to Finance Minister Christian Lindner.
But this country has a painful historical experience with inflation.
“We can’t fight inflation with loans,” as during the pandemic, Lindner also said.
Producer price inflation reached a staggering 45.8% year-on-year and a record 7.9% month-on-month.
By comparison, consumer price inflation at 8.8% in Germany appears to be contained.
Energy was the engine of the price increases. Without this, inflation for producers would have had a more “earthly” value of 14%.
Lower real incomes for citizens mean less money for non-essential goods and services, just as costs have risen considerably for much of the industry.
Some areas will resist relatively better, absorbing pressures at the edge of profitothers will be supported (or taken over – see Uniper) by the state, considered essential, but the public umbrella cannot spread uniformly over the entire economy.
Germany risks a recession early next year, which would no longer be a surprise even to the government or the central bank.
The situation is difficult for all of Europe
The Purchasing Manager’s Index (PMI) data for the Eurozone remained, for the second consecutive month, below the neutral line of 50 points for the industry and fell below this value for the services sector. a trend that could continue.
In the Eurozone, the latest forecast by the European Central Bank (B.C) sees growth of 0.9% in 2023, after 3.1% this year, and ahead of 1.9% in 2024.
For the next year, the ECB is more pessimistic than the International Monetary Fund (IMF) with 1.2% and the Organization for Economic Cooperation and Development (OECD) with 1.6%, but the respective estimates are older (July and June).
Inflation, according to the ECB, would drop to 5.5% next year and 2.3% in 2024.
The final quarter of this year is expected to see a 0.1% decline in Eurozone GDP, followed by a “flat” first quarter in 2023.
From our point of view, the risks are pronounced in the direction of a disappointment, already finding the conditions for a recession in Europe next spring, and probably also for the whole year, with an annual decline of more than 1%.
In the Central and Eastern Europe region, the European Commission recorded an increase in GDP in 2023 in the summer of 1.5% in Poland, 2.1% in Hungary and 2% in the Czech Republic.a.
With the current data and outlook for energy and the major economies of the Eurozone, the risk of very low growth or, at worst, recessions, has significantly increased.
In Hungary, where retail has already been in decline for months, in memory of the financial crisis, and European funds risk being stopped by Brussels, even Erste Bank’s forecast of 0.9% of GDP in 2023 may be too optimistic. .
China, back and forth
China continues to use an on / off dynamic by closing some cities to limit the spread of the virus, along the lines induced by the zero-case policy.
The current sequence is very different from that seen during the financial crisis, when the Chinese economy acted countercyclically, helping to cushion the global shock.
Now China is experiencing a contraction in residential sales, a slowdown in retail and credit.
Caixin’s manufacturing PMI fell below 50 points in the sector bear zone and weaker new orders warn of the near future.
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