How important are Covid and the war in Ukraine to next year’s economic outlook

According to the Collins English Dictionary, the word that best describes 2022 is permacrisis. This neologism derives from the union of two words, ‘perma’ which derives from ‘permanent’ and ‘crisis’. The word therefore assumes the meaning of permanent crisis, ‘a long period of instability and uncertainty’. But why this term? 2022 began with Vladimir Putin’s invasion of Ukraine, which brought the conflict to Europe seventy years after the Second World War, but not only; the harshest sanctions in history were imposed on Russia, which led to inflation at very high levels. Emblematic were the words of the President of the ECB, Christine Lagarde, last April: “Some say that we live in an era of ‘permacrisis’: where we move continuously from one emergency to another. Just 10 years ago we faced the worst financial crisis since the 1930s, then the worst pandemic since 1919 and now the most serious geopolitical crisis in Europe since the end of the Cold War”.

There were various economic repercussions. We recall that Ukraine has been considered ‘the granary of Europe’ for centuries, its invasion has therefore put agricultural exports at risk, with the consequent increase in prices throughout Europe. With the war, Europe showed its greatest weakness, the almost total energy dependence on Russia. Several countries of the world have had to equip themselves by reopening the extremely polluting coal plants. From here, we move on to the problem of pollution and climate change, another important aspect that marked 2022. War, pandemic, inflation: these are the central themes of the past year. But what will 2023 be like from an economic point of view?

According to the Economist, most countries in the world will be in recession in 2023, there will be a mild autumn and a drop in energy prices but this will not be enough. The winters of 2022-2023 and 2023-2024 will be very difficult, especially in Europe. There will still be problems related to inflation: interest rates are high and will reduce consumer spending while raising unemployment. In 2022, as many as 22 central banks have decided to raise interest rates, and this will inevitably have repercussions for 2023. Rising interest rates, for example, will weigh on mortgage lending and cause house prices to fall in many countries. some markets. In Britain, prices could fall by 5% compared to 2022.

Even the chief operating officer of the IMF (International Monetary Fund), Kristalina Georgieva, expressed her concern, underlining that 2023 is preparing to be a year tougher than the one we have left behind, especially for Europe.