The High commodity prices, the emergence of the Omicron coronavirus variant and a possible faster tightening of central bank policy than initially planned could affect world growth this year, the European Central Bank says in its latest economic bulletin. "Persistent supply bottlenecks, rising raw material prices and the emergence of the Omicron variant continue to weigh on short-term growth prospects," explains the text, which acknowledges that "early tightening and faster monetary policy in large advanced economies may have secondary effects on financial conditions in emerging market economies and would represent a downside risk to growth.
The ECB expects a 'considerably tougher' fiscal policy tone in 2022, although much less than previously anticipated, especially as a result of the withdrawal of emergency support in the face of the crisis ”. And he keeps intact his speech on inflation, which he considers a short-term phenomenon. “There is uncertainty about how long it will take for these factors to disappear. Nevertheless, over the course of 2022, energy prices are expected to stabilize, consumption patterns to normalize and price pressures from global supply bottlenecks are reduced. '
The ECB is counting on Ómicron results in higher volatility in global growth, although he cautions that it is too early to predict its long-term impact. He perceives that the world economy remains on a recovery path, but the downside risks to growth increase. Recent surveys of economic activity cited by the bulletin suggest that it remains weak at the beginning of the fourth quarter, particularly in the manufacturing sector, due to the aforementioned bottlenecks, while services have benefited from the reopening of large companies. economies. It estimates that world real GDP growth (excluding the euro area) will reach 6% in 2021 and then decline to 4.5% in 2022, 3.9% in 2023 and 3.7% in 2023. 2024. External demand from the euro area is forecast to increase by 8.9% in 2021, 4% in 2022, 4.3% in 2023 and 3.9% in 2024. However, this demand It has been revised downward for 2021 and 2022 from previous projections, reflecting the adverse impact of current supply bottlenecks on global imports. The ECB do not expect these bottlenecks to begin to ease until at least the second quarter of 2022 and that they will disappear completely in 2023. The document recognizes, on the other hand, that the balance of risks for world inflation is more uncertain.
Analysis that focuses on the euro area economy concludes that growth is moderating but remains hopeful that activity will pick up again strongly throughout this year and foresees that the recovery will continue driven by the strength of domestic demand. The good news is that the labor market is improving: more people have jobs and the number of workers enrolled in job maintenance programs is lower, which supports the prospect of an increase in household income and consumption.
The Savings accumulated during the pandemic, otherwise, will also support consumption, according to the ECB forecast. But it cannot be ignored that economic activity moderated during the last quarter of last year and this slowdown in growth is likely to continue into the first part of this year. To cope with the current wave of the pandemic, some euro area countries have reintroduced tougher containment measures, which could delay recovery, especially in the services, tourism and entertainment sectors. The pandemic is also affecting consumer and business confidence, and the spread of new variants of the virus is creating additional uncertainty. Also, rising energy costs are weighing on consumption. Equipment, materials and labor shortages in some sectors are holding back production, causing construction delays and slowing recovery in some parts of the service sector.
The analysis of public finances shows that the budget balance is already on an improvement path. After registering a maximum of 7.2% of GDP in 2020, the deficit ratio will have fallen to 5.9% in 2021, pending official data, and is expected to fall again, until 3, 2% in 2022 and stabilize thereafter just below 2% at the end of the projection horizon in 2024.