The slowdown of economic growth may be a “necessary price to pay” given the need to restore price stability immediately and without delay, Kristalina Georgieva, managing director of the International Monetary Fund, concluded in a recent statement. “This 2022 will be a difficult year, and 2023 may even be more difficult. Recession risks have increased for 2023.” We cannot rule out a potential global recession next year in light of the increased risks,” Georgieva said.
Action and strategy are needed here and now to meet the anticipated recession and the message of the IMF for the difficult year 2023. Companies should mobilize and prepare themselves to avoid salvaging something at the very last moment when it can hardly be saved.
Time flows. The message conveyed recently by the head of the IMF must be taken seriously and understood well. Crisis management and the lessons learned from managing during the pandemic, should be revisited and a plan should be made.
Restructuring, changes in markets, raw materials, teams, management decisions, and plans, are to be in the sign of expectations for the “bad” year 2023. It will help companies face the year better prepared.
The head of the IMF warned that the prolonged tightening of financial conditions will complicate the global economic outlook, and the key is to bring price growth under control.
After all these “mathematics”, explanations, views and calculations, it is clear what awaits the world. But where are we in it?
Appeals from the business community are constantly loud. It is very difficult for them now, as things stand, and even more difficult is the thought of 2023 against such bad predictions.
The state acknowledges that the winter is going to be difficult. The Minister of Economy, Kreshnik Bekteshi, recently went public with the view: “Ahead of us is a very difficult and unpredictable winter in terms of energy, which does not depend only on North Macedonia or the countries in the region, but it depends on how the situation with the war will unfold in Ukraine”. Nonetheless, such measures have been adopted as to give hope that it will be possible to have it a little easier than the initial expectation.
Inflation is an additional burden.
Rescue for the economy is sought in all possible variants.
Last year NBRM, through a series of instruments, started the tightening of the monetary policy with the aim to anchor inflationary expectations. Inflationary pressures last longer, are more dispersed, affect inflationary expectations and hence central banks must react.
The National Bank increased the base interest rate again, now by 0.75 percentage points, and it rose to 4.25 percent. This is the seventh time in a row this year that the central bank has resorted to this mechanism in order to stabilize the galloping inflation in the country, which reached 19.8 percent in October..
Experts have already warned several times that after such steps by the Central Bank, it is to be expected that there will be an increase in the price of loans, especially those with variable interest rates.
The basic interest rate of the central bank, which has been growing for the past period, is a signal for domestic banks to increase interest rates on both deposits and loans. And an additional blow to citizens and companies is that after the New Year, the legal default interest will also increase, which for citizens will amount to 12.25 percent per year, say experts in the media.
Chambers in the country are currently advising that instead of constantly defending the exchange rate of the denar, more attention should be paid to business, because without an economy a country cannot survive.
Then again, the Minister of Finance, Fatmir Besimi, stated in his latest column, dedicated to the budget and economic strategies, that gradual fiscal consolidation, a good strategy and sustained plan to accelerate growth, investments in human and physical capital, digitalization and sustainability are the five key steps to accelerate economic growth after the economy has recovered from the current global crisis.
In order to talk about accelerating economic growth and the use of public finances to stimulate growth, there should be fiscal space in the first place. But on the other hand, a strong fiscal tightening, especially at a time when economic growth is slowing down, can cause a contraction of the economy and negative consequences, says Minister Besimi.
Due to the price shocks occurring in the global markets due to the military and energy crisis, the American central bank, the Fed, is also making an upward correction of the interest rate on treasury bills and has indicated that such steps will continue in order to alleviate inflationary pressures.
ECB President Christine Lagarde says the risk of a recession has increased.
The European Central Bank raised key interest rates again, and they may reach levels that will limit economic growth, with the sole aim of taming inflation.
“Price pressure is spreading across multiple sectors. We expect that inflation will remain undesirably high for some time to come,” the president of the European Central Bank, Christine Lagarde, said recently.
Opinions are getting louder that Germany is in for a recession in 2023. The numbers prove it. Germany’s economy will shrink in 2023, as a dramatic increase in energy costs due to the Russian-Ukrainian war has reduced the chances of a recovery from the pandemic crisis.
Officially or unofficially, businesses are already “living” the recession.
The fact that they had pressures and huge problems in their work is their everyday life.
Statistical data say that the assessment of the economic situation of business entities in the manufacturing industry in October 2022 is less favorable than in the previous month, and less favorable than in October 2021. The number of employees is expected to decrease. The food industry welcomes the government’s decision to provide electricity at affordable prices, which covers food producers and in turn raises their hopes for smaller problems if that can be counted on at this time.
Time will tell if the measures taken by the state will impact the improvement of the companies and mitigate the consequences on their operations.
Support aimed at creating better conditions for conducting business is mandatory so that companies can overcome the expected recession with smaller losses.
Time will tell how high the price of the recession will be.
Maria Georgievska
editor of the show for business and economy PROFIT
