The Ice Age: The numbers behind the global economic slowdown

The global economy is in a slowdown that will last at least a few more years.

In the United States the situation is still relatively good, in Europe it is getting worse - and don't be jealous of the poor countries that the Chinese government is not ready to ease their debts to.

Who is unusual?

Israel, which has become one of the strongest economies in the world

Shlomo Ma'oz

10/20/2022

Thursday, October 20, 2022, 2:39 p.m. Updated: Friday, October 21, 2022, 7:38 a.m.

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Europeans are afraid of winter.

In third world countries they are afraid of death by starvation (Photo: ShutterStock)

The world trade of goods and services, which is important and vital - especially mainly for small countries that depend on trade for an increase in economic activity, such as Israel - will increase in 2023 by only 2.5% after a 4.3% increase in the year ending 2022. The global inflation rate for the year 2023 has decreased to 5.1 % after standing at 9.1% in the last year, following the release from the corona restrictions, according to updated estimates of the International Monetary Fund that were just published in Washington.

World GDP at constant prices will rise next year by 2.7% after 3.2% last year.

The fund also predicts that the biggest threat to the world economy has been removed, with the exception of the expansion of the wars now centered in Ukraine, the prices of goods, with the exception of oil, will return almost to the level they were in 2021 after rising this year by 7.3%.

The critical problem for the current economic world order is the ongoing shock due to the Russian invasion of Ukraine, Russian gas prices will continue to qualify in 2023 by another 30% after rising 202% this year, meaning they have tripled their price this year.

The rise in gas prices and the shortage of gas lead to the collapse of the structure of the European economy, whose governments are powerless in the face of a crisis they have not experienced since the end of World War II.

The sharp interest rate hikes by the Fed leader, an increase of about 3% since March, which most central banks are following, will lead to a slowdown in the rate of growth.

The interest rate will curb the increase in oil prices.

It will result in an 11% drop in oil prices in the North Sea, after a 42% increase this year and an increase in similar rates in New York.

Coal prices will drop next year by 6% after a 42% rise this year in South African coal prices, an indicator of coal prices that also affects electricity rates in Israel.

The continuation of interest rate hikes in the world, despite the slowdown in the growth rate, will lead to a decrease in the prices of agricultural goods in the world by 6% after a 14% increase this year.

This decrease in the prices of agricultural goods, together with a decrease in global transportation prices (a decrease in the global index of transporting goods by sea at a rate of 50% since the beginning of July), will moderate the global inflation rate, including Israel.

The main sufferers next year, in fact already this coming winter, are the Europeans due to their dependence on Russian gas both for industry, for power generation and for the construction of their homes and institutions.

The European public will freeze this coming winter.

The growth of the Eurozone next year will be small, marginal, only 0.5% after 3.06% this year, in the following years growth of only about 1.7% is predicted in the Eurozone.

The inflation rate for the year 2023 in the Eurozone is expected to drop to 4.5% after it was 8.8% this year.

Britain has withdrawn, Italy is threatening to withdraw and some countries are on the verge of bankruptcy.

The Eurozone is preparing for a particularly difficult winter, in all respects (Photo: ShutterStock)

German trauma

The savings rate has decreased because the public will try to maintain the standard of living by reducing savings.

The unemployment rate in the Eurozone will be 7% next year, and will remain close to that for years, overall there will be no new jobs in the background.

The budget deficit of the entire Eurozone, which consists of 19 countries, will be close to 3% next year, the debt to GDP 91%, far from the dreams of the "Maastricht Treaty" target that the European Union set as a debt target, 60%.

The GDP of Germany, whose dependence in recent decades on Russian gas was absolute during the time of Chancellor Angela Merkel (who did not obey the demands of all US presidents to distance themselves from Russia), will shrink by 0.3% in 2023 after growing by 2% per year in the past two years. Germany will grow again according to the fund By over 2% only in 2025. The GDP per capita decreased at constant prices at a rate of 0.4% after an increase of 1.4% this year.

German industrial companies that will have to pay ten times more for energy, are already working to migrate outside of Germany to find cheap opportunities for their production lines.

Inflation, which all governments in Germany are traumatized by because of the loss of control over it on the eve of World War II, will be around 5.4% in 2023 after 10.2% this year - and will drop below 2% only in 2026. The unemployment rate in Germany is also one of the signs of the people's trauma The German will rise next year to 3.4% after 2.9% this year.

In Italy, the GDP in 2023 will decrease by about 2% and will grow by about 1% per year in the following years.

GDP per capita in real terms will stagnate after a 3.3% increase this year.

The unemployment rate in Italy will be 9.4% next year and will remain at such levels and slightly lower in the following years.

Where will the Italians emigrate?

Once they immigrated to Germany, now it is beaten by itself.

In fact, it is difficult to know what the performance of the Italian economy will be after the formation of a right-wing coalition that will overcome a larger deficit and only partially listen to the demands of Brussels (the European Union) for a binding economic order.

The market does know what will happen, the Italian risk is increasing, the yield gap of a ten-year government bond between Germany, which is considered an anchor country in the Eurozone, and Italy has risen to 2.23%. That is, Italy is obligated to a higher interest rate that will make it difficult for it to repay the debt in the future, or Or to realize the threat heard for many years among Italian politicians, to leave the Eurozone in favor of Italian national populism.

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Liz Truss, the outgoing Prime Minister of England.

She paid in her chair for the collapse of the British economy (Photo: Reuters)

From England in the heat

In Great Britain, with the greatest crisis in Europe, GDP will decrease in 2023 by 0.9% after an increase of 0.5% this year.

The savings rate will continue to deteriorate in the coming years so that households can cover the cost of the cold winters due to the rise in gas prices accompanied by bankruptcies of gas companies.

The new Minister of Finance, Jeremy Hunt, who replaced the previous Minister of Finance last week, informed the residents of the government that they can forget about his predecessor's promises to subsidize and cover part of the cost of heating the houses and energy, the households will have to pay the huge bill out of their own pockets.

The inflation rate that detracts from the public's purchasing power will rise another 6.3% next year, after 11.3% this year, inflation rates that are more similar to weak emerging countries.

The unemployment rate will rise to 4.8% and in 2025 to close to 5%.

GDP per capita in the United Kingdom, in real terms, will stagnate in 2023 after increasing by 3.2% this year.

Britain's populist government thought there was room to increase the budget deficit by huge amounts in order to finance the energy price subsidy.

The bond markets, mainly held by pension funds committed to their peers, collapsed.

The Bank of England was forced to intervene with huge sums, gently reprimanded the government and said that it could no longer withstand the disaster caused by the government that pushes down the capital market and crushes the British pound.

The governor says outright that with such a huge deficit, raising interest rates by a sharp rate will be a reality.

Prime Minister Liz Truss decided to fire Finance Minister Kwasi Kwarteng who did as she said and appointed a new Finance Minister Jimmy Hunt who changed the policy 180 degrees and announced that he would actually raise taxes to reduce the government deficit which involved raising capital at rising costs.

Now, the prime minister herself was also forced to resign after she realized that she was being nominated for removal by the conservative party she leads due to the massive budget deficit she planned and also because of the plan to reduce taxes on those with high incomes. The fear in the international markets is that a financial crisis in Britain could spread to the world And add to the fire of uncertainty of the war in Ukraine, the rising gas price, the rise in the value of the dollar, the instability in Italy and President Biden's loose grip on the legislatures - if his party loses the majority in Congress after the mid-term elections in early November.

President of China, Xi Jinping.

China encouraged countries to take loans for the purpose of building and improving infrastructure through Chinese companies.

Now they are unable to repay them (Photo: Reuters)

Take America

In the US, GDP per capita will rise in real terms at a rate of 0.7% after 1.4% this year, according to the International Monetary Fund.

The inflation rate for the next year is 2.3% after 6.4% - the expectation for 2022. The unemployment rate will rise to 4.6% after 3.7% this year and will continue to rise in 2024-2025 to approximately 5.4%.

The debt to GDP of the US government will increase next year to 97% after 95% this year and will continue to increase every year by several percentages until 109% in 2026.

The US current account deficit will decrease next year to 3.1% of GDP after 3.9% this year and will continue to decrease to 2.4% in 2026, which will support the possibility of the dollar continuing to strengthen, not only because of the aggressive interest rate increases relative to the rest of the world's central banks.

The poor countries will suffer greatly in the coming years: according to the estimates of the World Bank, this year these countries must return a debt to the borrowing countries in the amount of 35 billion dollars, which they do not have because of the global economic crisis. About 40% of the debt of the poor is to China, which in the last two decades has tempted many countries to take loans, which were used to order infrastructure works from Chinese companies, which the Chinese government decided that they must build, pave, establish, anywhere in the third world and at any price.

Through these loans, China worked the poor policies that today face a broken trough. China is not ready to be part of countries The West that is looking for an elegant solution to the plight of the poor countries China did not send delegates to the International Conference of the World Bank's partner countries.

China claims that the World Bank and the IMF must also participate in waiving the poverty debt.

Sri Lanka has already collapsed and Egypt is in a worsening economic crisis with no foreign exchange and is asking for new and fresh assistance from the International Monetary Fund. The Egyptian pound is collapsing to reach a new equilibrium, trading freely after the exchange rate was fixed for two years until March. In Lebanon the infrastructure collapsed, power outages became long, There is a shortage of gasoline at the gas stations and in poor areas there is no drinking water, cholera is spreading.

Finance Minister Avigdor Lieberman.

In Israel, too, the indices that express growth will decrease, but they will still remain well above the global average (Photo: Reuven Castro)

Meanwhile in Israel

In Israel, one of the most powerful countries in the world today, GDP per capita is expected to increase at a rate of 1.33% in 2023 after a sharp increase of 4.4% this year, according to the International Monetary Fund. Total GDP will increase by 3% after 6.13% this year.

What is most interesting The fund's forecast is the extent of the surplus in Israel's current account which will rise in 2023 to 3.7% of GDP after 2.5% this year and will remain at levels of approximately 3.6%-3.8% in the following years until 2026. This surplus during the world crisis indicates the possibility that the shekel will continue to be a strong currency Relative to most currencies in the world, especially if the Bank of Israel continues to raise interest rates following the American Fed.

The interest rate increase is also mandated by the government's decision to reach inflation of 1-3%.

The increase in the interest rate is also a committed increase in order to overcome the apartment prices that harm Israel's social infrastructure.

The fund also predicts that inflation for the next year will be about 2.7% after about 5.3% for 2022.

According to the fund, the unemployment rate will decrease next year to 3.8% after 3.9% this year and in subsequent years will stabilize at 3.7% unchanged. In 2025 the population of Israel will already reach 10 million people. The surplus in the budget account that year will end at 0.09% in relation to GDP will disappear and in 2023 the deficit will be 0.4% of GDP and will rise in the following years to 1.3% in 2024 and to 2.5% in 2026, still low in international terms.

Israel's debt to GDP will decrease next year to 55% after 59% this year, and will continue to decrease towards 53% in 2026, among the best in the world. The savings rate in Israel, among the highest in the world, will remain unchanged in the coming years. Investments in relation to GDP will continue to be high in the coming years, about 25%-26% of GDP.

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• Liz Terrace

• Xi Jinping

• China

• The European Union

• International Monetary Fund