The economy in the eurozone will grow by 0.9% this year, according to the European Commission’s annual winter forecast. It was previously predicted that a recession was approaching. That sounds good, but according to RaboResearch head of macro strategy Elwin de Groot, there are still quite a few risks.
According to De Groot, there are a number of reasons to be less pessimistic about the economy. The main reason is the sharp drop in prices on the energy market. ‘Also, we see various governments are providing more support to businesses and households. Due to the tension in the labor market, consumption is also decreasing less rapidly than initially thought’, explains the macrostrategist.
Sharp increases in interest rates
But the flag can’t wave yet if it’s De Groot’s turn: ‘It’s right to be less pessimistic, but there’s also still a lot of uncertainty. The danger of a deep recession has not yet passed, it may continue to blur for some time.’
According to the macrostrategist, this is mainly due to the sharp interest rate hikes by central banks in recent times. “The impact of this is still unknown and these are the biggest and strongest interest rate hikes we have seen in the last thirty years,” explains De Groot.
Risks
It is therefore necessary to continue holding the brakes due to these sharp interest rate hikes, says De Groot. ‘The ECB is taking a reasonably cautious approach, but Americans are trying to calm themselves with interest rate hikes. This should have an impact on the economy.’
And there are also signs on the financial markets that the risk of a recession has not yet passed. ‘In the bond markets, we see long-term interest rates falling below short-term interest rates. This often goes hand in hand with a recession, so there is increasing risk rather than decreasing risk,’ explains De Groot.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
