After the upheavals of 2022, the world economy will pay for the broken boilers

Rising prices, war, interest rate hikes, global warming… The world economy, which was expected to be in good shape in 2022, has finally been hit by one crisis after another, aggravated by Russia’s aggression in Ukraine, and this means that 2023 is a dark year. .

According to a phrase popularized by historian Adam Tooze, 2022 will remain the year of “polycrises”: heterogeneous shocks that interact, staggering everything. Roel Beetsma, a professor of economics at the University of Amsterdam, emphasizes that these shocks “have increased since the turn of the century” along with the 2008 financial crisis, sovereign debt, pandemic, and energy crisis. For him, the world “has not faced such a complex situation since the Second World War.”

Persistent inflation

Experts unanimously said a year ago that its comeback, after years of indolence, was bound to be temporary, coinciding with the post-pandemic restart. Russia’s aggression against Ukraine and the energy boom changed the cards. Inflation, unprecedented since the 1970s and 1980s, is endangering millions of households in developed countries and threatening even more misery for those in poorer countries. However, it started to slow down to 10% in November in the euro zone and 6% in October in the United States.

According to the recommendations of the Organization for Economic Co-operation and Development (OECD), inflation in the main developed and developing countries of the G20 is expected to reach 8% in the fourth quarter and fall to 5.5% in 2023 and 2024. more targeted help to get out of it. France and Germany in particular, like others, have had to reopen the checkbook to help households and businesses. According to the Bruegel think tank, 674 billion euros have been promised to them since September 2021 in the European Union alone. Including 264 billion for Germany, where one in two people now buys only the bare essentials, according to a survey by the firm EY.

“Everything between fresh cream, wine, electricity has gone up,” says Nicole Eisermann, who runs a stand at a Christmas market in Frankfurt. “I’ll be careful, but I have a lot of children and grandchildren,” smiles Günter Blum, one of the customers asking for a gift.

Central banks are tighter

Almost all central bank governors, primarily tasked with maintaining price stability, have resumed the path of interest rate hikes. But this strategy makes the economy a bit more difficult by making borrowing conditions more expensive for households and businesses. This is the case for States, which have become more indebted since the financial crisis and the pandemic, and for some are now threatened with instability or even default.

A glimmer of hope came from the United States: Federal Reserve (FED) chief Jerome Powell said in December that interest rates may be raised less sharply, but warned that they could remain “high for some time.” The European Central Bank sees itself still far from the point of arrival, without going forward to 2023: a new increase was achieved in December, but it may be less strong than in October.

Recessions and climate crisis on the horizon

The planet is still far from a generalized recession next year: the IMF still predicts growth of 2.7% and the OECD of 2.2%. But the UK has already said it is in “recession” and many economists believe Germany and Italy will follow. For the euro zone as a whole, the S&P Global rating agency expects a particularly difficult first quarter and stagnation throughout the year. Further worsening of the forecast after the announcements during 2022.

At the same time, China’s locomotive is running out of steam: there, consumption and manufacturing output have suffered from the strategy to combat Covid, and exports have been weighed down by the global slowdown. And yet there is hope: China announced yesterday a general easing of health regulations against Covid-19, to calm public anger and revive its faltering economy.

S&P Global writes: “The United States is suffering from a classic overheating problem, and this problem must be resolved”, while on the other hand, “Europe’s energy configuration will take years.” But “the worst crisis in slow motion is the climate crisis,” says Roel Beetsma.

In the face of a proliferation of disasters, ambitions remain far shy, as did COP27, which failed to set new targets for reducing greenhouse gas emissions. States are struggling to manage rising energy prices

it was also reflected in their slow transition. “If we don’t do enough, it will hit us on an unprecedented scale,” thinks Roel Beetsma.

Ali BEKHTAOUI and Mathilde DUMAZET with Jean-Philippe LACOUR in Frankfurt/AFP