Smooth deceleration

The global economy defies the law of gravity, at least the one painted by the gloomy predictions for 2023. Among the great powers, the pace of growth has been slowing, but the strength of labor markets and the reduction in debt levels have allowed households—and businesses—to weather the storm without major damage, despite the abrupt rise in the price of money. Nor have emerging countries suffered anything like the feared debt crisis that often accompanies the rise in rates, although China's slowdown is felt far beyond its borders, and Germany—and with it the EU— It is one of the economies most affected by the slowdown of the Asian giant.

After a 2023 above expectations, a soft landing can be expected in the US and Europe as a whole. This is dictated by the consensus of analysts and the IMF. Historical experience says that when interest rates rise, especially so aggressively, it is difficult to avoid recession. And yet, except for some quarters in the red, the existing cushions have cushioned the triple shock of the energy crisis, the rise in credit prices and geopolitical turbulence. Experts consider that since the Great Recession the economic system has improved its resilience: the bank is more capitalized, there are no real estate bubbles like those of 15 years ago, and both families and companies have refinanced their debts. Furthermore, economies are still benefiting from the inertia of the fiscal impulses of the pandemic. And the global economy has learned to move with higher inflation and higher rates without major scares, although there are economists who maintain that the effect of tightening monetary policy has not yet been fully seen. In the coming months it is foreseeable that the moderation in prices will allow salaries to recover purchasing power, but that will not be enough to close the generational gap that separates younger workers from their elders in a labor market like the Spanish one.

That soft landing, however, is not guaranteed in a world characterized by radical geopolitical and economic uncertainty. Because, despite everything, fragility is still there, after a trail of crisis. Inflation has moderated since the peaks of 2022, but it is still at rates that are too high for the liking of central banks, and the rise in oil prices as a result of the ongoing conflicts does not help. In addition, attacks on merchant ships in the Red Sea are causing one of the biggest disruptions in global trade since the pandemic, with freight costs rising by 170%, although experts trust that this is temporary. Western economies face the difficulty of having to rebalance their accounts after years of public support for successive crises (pandemic, supply chains and energy). But with an election year in half the world—with almost half of the world's population called to the polls—major restrictions on spending cannot be expected.