The global economy isn’t slowing down – and these are the reasons

Thank God the world economy is not sticking to the negative forecasts of the World Bank and the International Monetary Fund. The IMF spoke of “thunderclouds” back in October last year, and in its World Economic Outlook published yesterday, the IMF continued the series of negative forecasts:

• The economic prospects are “more gloomy today than they have been for decades.”
• The world economy is facing its weakest growth since 1990.
• The IMF forecasts a decline in growth in the current year for around 90 percent of the national economies.
• The IMF forecasts growth of 0.8 percent for the euro zone this year.
• In Germany, gross domestic product is expected to fall by 0.1 percent in 2023.

This pessimism has a long tradition. But does it have its justification?

I think no. Painting black is not the order of the day, it’s just the fashion. Everyone is afraid of missing out on the next crash. So they predict it.

But the true world economy is fighting its way forward. She wants to grow, not shrink.

Business world is not doomed to decline

The Tiger Index – the abbreviation Tiger stands for Tracking Index for the Global Economic Recovery – published jointly by the Brookings Institution (Washington) and the Financial Times (London) reports a robust state of the global economy:

“The world’s leading economies are showing surprising resilience and may avoid a sharp slowdown this year.”

Here, in a nutshell, are the five reasons for an economic world that is by no means doomed to decline – nor to shrink:

1. The invisible hand of the market takes hold

All entrepreneurs in the world get up in the morning so that things don’t turn out as predicted on the evening news. Supply chains are relocated, energy costs are reduced, strategies adjusted so that business plans can still be fetched.

The 40 Dax companies reported an increase in sales of 15.5 percent and an increase in profits of three percent for 2022. The invisible hand of the market is grasping in nature.

2. Bankruptcy of the Silicon Valley Bank mastered internationally

Central bankers and finance ministers did a good job after the collapse of the Silicon Valley Bank. The fast and internationally coordinated procedure, but also the discreet communication of the private banks towards their major customers were effective.

A core meltdown of trust capital did not take place. The dominoes wobbled but stayed put.

3. China ends zero Covid strategy

China’s leader Xi Jinping has finally abandoned his zero-Covid strategy. Brookings trade expert Prof. Eswar Prasad expects that China will now achieve the planned 5 percent growth.

Important to know: A 5 percent increase in GDP in China means an additional one trillion euros. This corresponds to a good one percent of global GDP.

4. World market prices for natural gas are recovering

The world has largely resisted the sanctions regime of the NATO countries and thus protected the energy markets from a sustained energy price shock. The cancellation of western oil and gas contracts with Russia did not lead to a permanent reduction in supply, but to the successful acquisition of new customers by the Russians in India, China and elsewhere.

The result: The world market prices for natural gas are recovering and have fallen back to the pre-war level since the highs.

5. Decarbonization and digitization drive growth

The two megatrends of this century – decarbonization and digitization – are intact. The social desire for an end to the generation of energy through combustion is so robust that elections can only be lost but not won against it.

There is also the need for companies to free their processes and products from physicality. Companies today are either digital or not at all. Both megatrends will drive growth in the coming years, and they may even last for decades.

Conclusion: Anyone who wants to can continue to fear the stock market crash, climate death and the end of globalization. It would be more digestible if the economists at the IMF and the World Bank would not like to paint themselves black, but would orientate themselves towards the cheerful forward drive of the Bremen Town Musicians, where the donkey calls to the rooster: “You can find something better than death everywhere.”