The Dutch financial group predicts negative growth rates in Germany and France in 2023. From 4.5%, growth in Greece will drop to 0.7%, without the economy going into recession. Inflation will fall in 2024.
In recession the two largest economies of the eurozone will collapse in 2023, Germany and France, as estimated by ING. However, the Greek economy will show strength in 2022 and will maintain a positive growth rate (0.7%) in 2023.
In particular, despite the great pressures from the increase in energy costs, Greece will achieve a growth rate 4.5% (from 4.2% previously expected), but with inflation remaining high, as the Dutch financial group.
According to its updated monthly bulletin for September, Greek GDP will expand at a rate of 3.5% in the third quarter of 2022, slowing to 2.3% in the fourth quarter. For in 2023 the start will be negative, with a GDP contraction of -0.3%, but it will “close” with an overall growth rate of 0.7%, which will increase to 2.1% in 2024, with Greece among the countries which will not be at risk of even a technical recession (two consecutive quarters of negative growth).
ING’s estimates for Greek GDP
The positive message, however, concerns inflation, as well from 9.7% in 2022, it is expected to land at 4.5% in 2023 and return to levels below 2% in 2024.
Examining her course of the eurozone as a whole, the ING senior analyst Carsten Brezisky notes that the return, after the summer break, to the European economic reality means a return to a recessionary environment, as natural gas prices move from one record high to another and will lead to unprecedentedly high energy bills during the winter. Even without a complete shutdown of Russian gas, high energy and food prices will weigh on consumers and industry, making a technical recession – at the very least – inevitable.
ING’s estimates of the path of inflation
The picture of the world economy
THE recession will “hit” the global economy in a different way. Breziski notes that the American economy is actually in a technical recession—defined as two consecutive quarters of negative growth—but it doesn’t feel close to recession as the labor market and private consumption remain strong.
ING’s US chief economist James Knightley argues that weaker global growth, a strong dollar and a slowdown in the housing market due to higher interest rates will create a sense of a “real” recession in late 2022 and early 2023.
Elsewhere in the world, there is no evidence that recession is inevitable, but given that the china and emerging markets need higher growth rates than the Western Hemisphere, sub-expected growth rates can easily “indicate” a recession.
The response of central banks
With different shades of recession spreading across the global economy, but inflation remaining stubbornly high as a result of post-pandemic supply and demand mismatches, as well as energy price shocks, the dilemma for major central banks worsens: how to balance inflation and growth. In the past, the answer would have been clear: most central banks would have shifted towards an easing trend. But not this time.
This period records one change of mind, which was recently pictured at the Jackson Hole convention. Which is characterized by central banks trying to tame inflation, accepting the potential cost of pushing economies into further recession.
Whether the central bankers’ shift in attitude is the right thing to do or simply exaggerated is a difficult question to answer. But central bankers have implicitly stopped caring what the impact of their policies will be on the economy and prefer to focus on inflation.
However, ING believes that this change in mindset will not last for long, as the blow to economies will be such that the Fed and ECB they will be forced to stop the policy of continuously raising interest rates.