Speaking at the SteelOrbis 2023 Spring Conference & 88th IREPAS Meeting held in Barcelona on May 7-9, Pedro Videla, professor and head of the economics department at IESE Business School, pointed out that there is incredible economic uncertainty stemming from the policies that have been followed in the past, adding that the global economy has experienced three shocks in this decade.
The first shock was the pandemic, which resulted in a four percent decline in global GDP, with 90 percent of the world economy going into recession. He stated that governments reacted to this development by pumping money, which saw the ratio of government debt to GDP in advanced economies peaking at 120 percent during the Covid lockdown, larger than during World War II. Mr. Videla described the situation during the pandemic as “a tsunami of liquidity”. The second shock was the invasion of Ukraine that caused a substantial increase in prices of commodities, especially coal, gas and wheat. The estimated share of GDP spent on energy end-use was as big as during the first oil crisis back in the 1970s, Videla pointed out. Lastly, the third shock was inflation; the headline inflation, the measure of all prices in the economy, increased during the invasion of Ukraine. Besides, money supply in the EU multiplied in the last ten years to €9 trillion.
Sharing GDP growth forecasts, Mr. Videla noted that world GDP is expected to grow by 2.9 percent in 2023, while in the US tighter financial conditions will hold back growth, with the US GDP forecast standing at 1.3 percent, while in the euro zone the outlook is brighter than a few months ago, with GDP forecast at 0.7 percent in 2023. He stressed that the emerging economies are doing much better in terms of GDP growth.