We will not return to such low interest rates as we had before 2020, said Beata Javorcik, chief economist of the European Bank for Reconstruction and Development, in an interview with the Polish Press Agency. – We will probably not see the world as it was before the pandemic – she added, warning against a situation when countries in the world will be divided into several groups, between which trade will be severely limited.
According to Javorcik, changes in the global economy will partly be related to the fact that “the heyday of globalization is behind us and we will be withdrawing from this globalization.”
The chief economist of the EBRD added that the end of the globalization period is due to the change in the geopolitical situation. – I am afraid that today the global economy or world trade is no longer subject to economic interests alone, as it was not so long ago, but depends on political considerations. Such an approach has its costs, which are currently accepted for political reasons, Javorcik pointed out.
Searching for new suppliers
– Over the past decades, one of the factors that has held back inflation on a global scale has been foreign trade, and precisely the fact that China thanks to their huge human resources, they contributed to the reduction of production costs, which in many countries contained inflation. Global tariff barriers were also lowered, which also led to lower inflation and low interest rates, reminded the chief economist of the EBRD.
In her opinion, global corporations are currently looking for new suppliers in new places to become resistant to geopolitical shocks.
– Currently, it can be seen that companies are not so much willing to give up suppliers from China as they have adopted the “China plus 1” strategy of retaining suppliers from this country and at the same time have alternative suppliers – she said. The chief economist of the European Bank for Reconstruction and Development assessed that Central Europe, and thus Poland, can gain a lot from this strategy.
An opportunity for the region
– In our latest report entitled “Business Unusual”, showing economic changes after the outbreak of war, we indicate that German companies have a very positive opinion about suppliers from Poland or HungarianSlovakia and Czech. This region is perceived much better than other parts of Europe or Türkiye or Asia. So there is a chance for the region to benefit from changes in company strategies, noted Beata Javorcik.
As she stated, the world economy may lose a lot if the political situation becomes so severe that countries in the world will be divided into several groups, between which trade will be severely limited. In her opinion, this would be a negative process, the effects of which would also be negative for Poland.
– If we were to find ourselves in a world which, for political reasons, would be divided into several trade blocs and there would be no exchange of goods between these trade blocs, everyone would lose out. This was the case under communism, when trade between the socialist Council for Mutual Economic Assistance and Western economies was limited. Trade between countries in these organizations increased sharply when the restrictions were lifted, which shows how much the policy limited the benefits of international trade, the economist said.
“Get used to inflation and higher rates”
According to Javorcik, these factors lead to a situation where one has to get used to higher inflation and higher interest rates. “I think the long period of low rates we had before the pandemic was rather unique and we won’t go back to that,” said the EBRD’s chief economist.
She added that historical data suggest that inflation in our region may remain at an elevated level longer than forecasted.
– In our region, we see that inflation related to the costs of food and energy carriers is falling, while core inflation has hardly moved or is still growing, as is the case in Poland. Of course, this is not just a problem in our region. In the world, core inflation is falling slower than general inflation, stressed Beata Javorcik.
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