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Europe between recession and growth and comparison with the world

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Europe between recession and growth and comparison with the world

From Japan to the UK at the beginning of 2024 we’ll be talking about again recession in a context that is increasingly difficult to manage, with several wars on the way and inflation that remains too high to sleep peacefully. But what also stands out is an extremely diversified situation dependent on the different policies, more or less appropriate, prepared by the central banks.

Japan and the BoJ’s ultra-accommodative policy

In the fourth quarter of 2023, the Japanese GDP fell 0.1% compared to the previous quarter by 0.4% compared to the previous year. This is how the economy of the Land of the Rising Sun entered “technically” in recession after recording a decrease of 0.8% in the previous quarter. A cold shower for the market which was expecting a small increase of 0.2%. A figure that mainly discounts the increase in inflation, since in real terms, GDP would have accelerated to 1.9% from 1% in 2022.

The 2023 nominal GDP of Japan it thus stood at 4,200 billion dollars, causing Japan to slip to fourth place in the world ranking, after the USA and China, and after Germanywhich took third place with a GDP of 4,500 billion dollars.

It must be said that the Bank of Japan has never raised rates like Western central banks, keeping them in negative territory despite accelerating inflation. A policy aimed at giving oxygen to consumption, through an increase in nominal wages, which however today places the Bank of Japan in contrast with the other Western central banks, having to announce “out of time” a withdrawal of the ultra-accommodative policy (probably from April) while the Fed and ECB are already preparing to cut rates.

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UK also in recession

Together with Japan also the economy of United Kingdom ended up in recessionreporting in the fourth quarter of 2023 a GDP contracted by 0.3% compared to the previous quarter, when it fell by 0.1%. The United Kingdom also “technically” entered into recession, having recorded two consecutive quarters of negative GDP, but the year 2023 is saved with a +0.1% compared to 2022.

The analysts’ idea in this second case is that the UK economy has hit rock bottom and is ready for a rebound, which will arrive in 2024. For this reason, an early cut in interest rates by the Bank of England appears more likely today.

Germany becomes the Cinderella of Europe

The German economy was not saved from this wave of slowdown and entered recession in 2023, recording a GDP drop of 0.3% due to the crisis that hit the industrial sector due to the high costs of energy and the difficulties in exporting in response to the global economic crisis. Factors that have combined with the weakness of domestic consumption, penalizing the locomotive of Europe.

In this case, the snitch is in the hands of the ECBclose to putting an end to the restrictive policy developed to combat inflation, even if the time is not yet ripe and we can wait until the end of the first half of this year.

The new forecasts from the European Commission

The European Commission’s forecasts announced yesterday instead confirm that theThe EU has avoided the recession. “The European economy is slowing down. It avoided recession, but it had very low growth and will continue to have it this year too”, admitted Commissioner Paolo Gentiloni, adding “we are confident that economic activity can resume activity in 2025 and this also applies to Italy”.

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The EU has revised the eurozone GDP estimate at 0.5% in 2023 from the 0.6% expected in the autumn ed to 0.8% in 2024 from the previous 1.2%. In 2025 we expect a return to growth (+1.5%). The same goes for Italy which will grow by only 0.7% in 2023 and 2024 (previously an increase of 0.9% was estimated in 2023), while the forecast for 2025 remains unchanged at 1.2%. %.

The ranking sees between worse in the EU: Sweden (+0.2%), Germany (+0.3%), Netherlands (+0.4%), Finland (+0.6%), Austria (+0.6%), Estonia (+ 0.6%) and Italy (+0.7%).

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