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Next Previous M. Michael: Definite growth rate growth, possible recession HOME • INSIDER • CYPRUS • M. Michael: Definite growth rate growth, recession possible
The rate of economic growth will certainly slow down, while the question remains whether we will have a recession, ie a negative growth rate and reduced output, as a result of rising interest rates by the Central Banks, to fight inflation caused by the war & nbsp; in Ukraine and the new restrictive measures of China, said to KYPE the professor of International Trade of the University of Cyprus, Dr. Michalis Michael.
He said energy and minerals prices had already risen because of the pandemic and the policies of governments and central banks taking steps to avoid a recession. In addition, transportation costs were high due to high demand for containers and reduced availability, as there were delays in many ports due to restrictive measures.
The war in Ukraine has exacerbated the situation, as Russia and Ukraine are major producers of energy, oil, gas and many minerals, as well as grain. Both the war and the Western sanctions on Russia have resulted in & nbsp; significant increases in energy prices, and in many ores, Dr. Michael added.
On the other hand, the outbreak of the pandemic again in China and the lockdown in large cities such as Shanghai, has resulted in a reduction in Chinese production, with a consequent reduction in demand for raw materials, with a negative impact on the price of oil and minerals , noted in KYPE, Dr. Michael. In addition, he said, although ports in China are still operating, their proper operation has been affected by restrictive measures, as ship service times have increased. This will put further pressure on transportation costs, he noted.
Therefore, said Dr. Mikhail, there are two opposing forces: On the one hand, the war in Ukraine and the sanctions that tend to push for an increase in the price of energy and several minerals that Russia exports, and on the other hand, the lockdown and the reduction of production. in China, which is expected to have a negative impact on raw material and energy prices.
The increases in energy prices and transportation costs have been transferred to the increased prices of consumer products, with the result that, according to the professor, high inflation is recorded in almost all countries. Trying to deal with it, some central banks began to react, raising interest rates in order to reduce demand, to reduce prices and inflation, he said.
“In the near future it seems we will have ups and downs in energy prices and the prices of many minerals and grains, but over time I expect that the policy of the Central Banks to reduce inflation in Europe and America will most likely lead to a recession, reduced demand, reduced production and that it will push down the demand for energy and minerals, “he said.
So, he added, & nbsp; “I expect that in some months we will have a downward pressure on the prices of minerals, electricity, energy, etc., which will reduce the rate of inflation, as is the target of the Central Banks.”
But this will definitely have an impact on economic growth, note. “The rate of economic growth will certainly decrease and the question remains whether we will have a recession, that is, a negative growth rate, a decrease in production. “I am very afraid, and this is what most economists expect, that in several countries the growth rate is likely to become negative, that is, production will fall,” he said.
Dr. Trump noted that in view of the war in Ukraine, no special emphasis is placed on the liberalization of trade relations between the two countries. The restrictions imposed on Trump are still in place, which further create problems for the proper functioning of international trade.
He estimated that the war would have a major impact on the real incomes, especially of the poor countries. Even before the war there were upward trends in agricultural prices. “Therefore, a bigger problem arises for poor countries, which devote a very large portion of their income to food and energy. The consequences for them will be much greater “, he noted.
Regarding Cyprus, Dr. Michael said that we are also affected due to the increase in prices, but mainly the production is affected, especially the services. About 30% of the tourists came from Russia and Ukraine, which are not expected to come this year, he noted, which reduces the provision of services and will push down the growth rate of the economy. In addition, if the EU decides to impose further sanctions on Russia, he said, it is likely to affect shipping, whose contribution to Cyprus's GDP is around 5%, with additional negative consequences for the Cypriot economy.