According to US Treasury Secretary Janet Yellen, the global economy is not doing so badly. She said that today at the G20 meeting. Not only the US, but also other economies would have proven their resilience in this time of sky-high inflation and economic uncertainty.
BNR’s house economist Han de Jong agrees with that opinion, he says. He thinks the outlook is currently much better than was thought a few months ago. This, he says, is due to two main factors. ‘Firstly, energy prices have fallen considerably,’ he says. ‘In Europe in particular, gas prices have fallen spectacularly after they had risen spectacularly until August.’
That price is now considerably lower again, and De Jong calls that good news. He also calls it good news that China has ended the zero-covid policy, after which the Chinese economy is open again. “It may take a while to get things back up and running again, but it will have a significant positive impact on global activity over the course of the year.”
Fixed issues
De Jong also speaks of solved problems elsewhere in the world. For example, the problems surrounding the supply chains have more or less been resolved, international freight rates have fallen and he emphasizes that a whole series of purchasing power support measures have been introduced in Western countries.
‘On balance, people suffered a considerable loss of purchasing power last year, and measures to support purchasing power were taken in response,’ says De Jong. “And they’ve kind of gone in now.” According to De Jong, there is indeed a possibility that these will turn out to be ‘very generous’, and that purchasing power will develop much more positively in the current year than was feared a while ago. “All in all, I think the outlook is much better than a few months ago.”
Inflation remains a problem
However, Yellen emphasizes that inflation remains a major problem and that one must remain vigilant. And therein lies the big ‘but’ in the matter, De Jong thinks. ‘Inflation is of course much higher than desired, and much higher than is good,’ he continues.
“We have not yet seen the growth dampening effect of interest rate hikes.”
And that still causes problems, he thinks, especially for central banks. Ultimately, they must curb inflation by raising interest rates, something they have already done vehemently, according to De Jong. “So I would be wary, because we know that rate hikes have a delayed effect on the economy,” he concludes. “So we haven’t seen the growth dampening effect on the increases yet.”
Extremely difficult
According to De Jong, what makes it even more difficult for central banks is the budgetary policy of governments. While central banks try to curb growth, governments want to work the other way. ‘Central banks are therefore somewhat thwarted.’
