The global economy, despite the persistent and largely coordinated response of major central banks with tight monetary policies and successive interest rate hikes, is not easily returning to normal.
Currently, the global economic growth rate averages around 3%, and in 2024, with a number of Western economies on the brink of recession, they are not expected to pick up, and stubborn inflation, according to most analysts, will not return to the desired level of 2% until the end 2025.
It should be noted that global debt has already exceeded 330 trillion. euro, which has increased significantly over the past two years, and the debt-to-GDP ratio already exceeds 300%, creating an intense liquidity bubble that, if it bursts, could drag down almost the entire global structure with it.
It should not be forgotten that much of the increase in debt is occurring in developed economies such as the US, France and the UK, while emerging economies also have high ratios of household private debt to disposable income.
In addition, China’s anemic growth, which can no longer absorb exports in quantity and value as it once did, primarily from Europe and especially Germany, is creating disruptions in world trade that cannot be immediately normalized without the world system going through the quagmire of a recession or a process of stagflation that will take time to overcome.
The ongoing war in Ukraine cannot be underestimated, which affects both the energy balance in Europe and the constant search for alternative corridors and ways to become independent from Russian oil and gas.
The geopolitical instability currently experienced in Europe due to the war in Ukraine is affecting much of the growth, as well as the recovery of important economies such as Poland, which currently has one of the largest agricultural sectors in Europe.
In any case, all of the above factors are a common factor in delaying the global economy’s return to a strong growth trajectory, meaning that new alliances forming and ongoing changes in the direction of international trade are likely to lead to a new equilibrium point driven by a new economic and geopolitical order.
Meletis Redumis – economist of the banking sector of the publication FROM.