The economy in 2023
Compared to the outlook from a few months ago, 2022 is ending with positive surprises in terms of the activity in advanced economies. Despite the enormous uncertainty that has been with us this past year as a result of the war in Ukraine and its impact on energy prices and supplies, global activity has proven itself quite resilient and better off than expected.
This resilience is mainly the result of four factors. The first is the buffer provided by the savings accumulated during the pandemic, which has been a common feature in many countries. Secondly, the strength of the labor market, as reflected in the low unemployment rates of the leading developed economies and the dynamic job growth. Thirdly, a generalized improvement in energy and other commodity prices since the summer, which is now being reflected in production prices that are starting to slow down. Fourthly, the flexibility and adaptability of companies in the face of so many uncertainties and the energy crisis. All of this has allowed consumer spending to continue growing at a good rate, despite the loss of purchasing power due to high inflation.
Given these circumstances, based on the forecasts of BBVA Research, the growth for 2022 has been revised upwards practically worldwide, which provides a good starting point for the year 2023. In any case, we must be prudent, since many risks remain and next year's growth will be below its potential.
Even though economic activity is doing better than expected and the probability of entering a recession has gone down, the advanced economies are clearly in a downturn phase based on the early indicators.
In Europe, we are more confident that there won't be any restrictions on energy supply, thanks to the high level of gas reserves, the reduction in energy consumption and the diversification of energy sources. However, given the high inflation (which significantly reduces disposable income) and the effect of the ECB's interest rate increase, a moderate decline in activity in the fourth quarter of 2022 or the first quarter of 2023 can't be ruled out. In 2023 as a whole, the GDP of the eurozone will be virtually stagnant with respect to 2022 (-0.1%), according to our forecasts.
In the United States, the technical recession could come a little later, in the second quarter of 2023, brought about by the monetary constraints being imposed by the Federal Reserve in order to tackle inflation and avoid de-anchoring expectations. In any case, it would be short and low in intensity, such that for the whole of 2023 we expect GDP to grow 0.5%.
In addition, both in Europe and the United States States, the economy is strong enough that we can expect a mild recession, if at all. Unlike other crises, there are no significant imbalances, except in some markets, such as home prices in some countries or the debt of a manageable percentage of companies, which will have more problems dealing with rising interest rates. Meanwhile, bank balance sheets are in a strong position, so we expect no credit restrictions.
