Page 17 - economic report 2021

levels of debt. Moreover, most countries have a limited margin for fiscal manoeuvre to mitigate the
impact of the war after the enormous cost of the pandemic on public accounts. To this is added the
lockdowns ordered in manufacturing and commercial nuclei in China over the months of April and
May 2022, to contain the pandemic, aggravating supply issues to other regions.

According to the IMF report published in July 2022, world GDP will grow 3.2% in 2022 and 2.9%
in 2023, representing a major deceleration in relation to the forecasts made in January (4.4% and
3.8%, respectively). This prognosis is founded on the assumption that the conflict in Ukraine will
remain limited, that future sanctions against Russia will exempt the energy sector, and that the
health and economic impacts of the pandemic will gradually dispel in 2022. Moreover, the impact
of the conflict is expected to be more negative for emerging and developing market economies
than advanced economies, as support policies in the former are more limited and immunisation
against COVID-19 is generally slower. Within the developed economies, a lower impact from the
war is expected in the USA than in the Eurozone, as the Eurozone is more dependent on energy
and food from the countries in conflict.

The US economy is going through a contradictory moment. GDP has shrunk 0.4% in the first
quarter of 2022 compared with the fourth quarter of 2021. The factors that have most influenced
this drop in GDP are directly linked to highly volatile elements such as the slowdown in inventories,
faced with the speed with which they were built in the previous period, and the widening trade
deficit, meaning that the USA has imported
The US economy will be less af ected by more than it exported. Another factor to take

the war in Ukraine than the Eurozone. into account is that the public stimuli linked
to coronavirus have disappeared. Despite the
contraction, strong consumer spending (which
has increased 0.7%), continued investment in business – despite weakening – and the strength 15
of the labour market show that the recovery remains resilient. This economic trend has pushed
prices up even further, leading the Federal Reserve to quicken the pace of interest rate rises
planned for 2022.

The impact of the armed conflict in Ukraine will be lower in the USA than in the Eurozone
because the economic ties are weaker and because it is a major energy producer (19% of oil
and 24% of gas worldwide in 2020). Nevertheless, the worsening supply problems in the global
chains, the lower purchasing capacity of families in the current context of high inflation and the
tightening of financial conditions around the withdrawal of the monetary stimuli explain the
reduction in economic forecasts for 2022 to 2.5%, according to the OECD (2.3% according to
the IMF). Despite the economic slowdown and rebound in inflation, which is expected to reach
an average of 5.9% in 2022, the unemployment rate could continue to fall to 3.6%, a historic
low. Finally, the public deficit is expected to be reduced to almost half (from 11.8% of GDP in
2021 to 6.7% in 2022).

In the Eurozone, data on economic activity The European economy slows down
maintained a fairly high rate of progress, with in the f rst quarter of 2022 but there The external environment of the Andorran economy | I. The international economy
0.6% growth, thanks to the impact of the
strong recovery of the Irish economy (+10.8%). is no risk of recession if Russian gas
Among the main countries in the area, there supplies cont nue.
are several differences: GDP has grown 0.1%
in Italy and 0.2% in Germany and Spain, but contracted 0.2% in France. The rising energy bill
and growing uncertainty generated by the outbreak of war explain why estimated growth for
the Eurozone in 2022 was cut 1.1 points to 2.6%, according to the IMF, OECD and the European
Commission. By country, growth in 2022 fell most in Germany and Italy, due to their greater
exposure to gas imports from Russia and the importance of industry to their economic structure