In view of his negative outlook IMF for global economic growth of around 3% over the next five years with weighted concerns about interest rates, defaults banks and geopolitical divisions in Europe, as well as looming global poverty, it is worth assessing two recent developments that are likely to affect, on the one hand, the price level in the supply chain due to rising inflation, and on the other hand, rising inflation. activities of credit institutions in our country, taking into account the latest developments in the international banking environment: firstly, the doctrinal decision to reduce crude oil production by 1.16 million barrels per day is based on alarming economic forecasts of its members OPEC about the deterioration of the global economy and, as a result, the reduction of purchasing disposable income and demand.

However, this solution works by undermining and torpedoing control efforts. inflationary pressure in Europe and the Americas as this will affect the entire supply chain with possible price increases for key industrial and consumer goods.

Brent oil prices are projected to reach $95/bbl in 2023 and around $100/bbl in 2024. High prices indicate a worsening economic climate with the risk of an economic recession due to weak demand. Undoubtedly, there will also be a significant reduction in refinery profits in the future. All reasoning is also based on the large share held by OPEC, with about 30% of the world’s crude oil production (in particular, production in South Arabia is 10 million barrels per day).

Secondly, concern about the deposition of its reserves Credit Suisse and its collapse Bank of Silicon Valley with the massive withdrawal of deposits from startups as well as from Silver Gate, they caused a crisis of confidence and increased the general reflection in Europe and the US regarding the monetary policy pursued by central banks. This reflection was at two levels: on the one hand, the need to either further tighten monetary policy with higher interest rates to offset the cost of credit and tame inflationary expectations, and on the other hand, the need to stabilize the interest rate. rates due to the risk of appreciation of money.

The loss of confidence in the banking system, which entails the withdrawal of capital, leads to two options on the part of banks: either to return the loans issued, or to liquidate bonds, but at prices that are obviously lower than the nominal purchase price. if they have been removed before. However, the primary requirement is to provide liquidity in response to increased customer demand. In this case, from the difference between the purchase price and the sale price, for example, Silicon Valley, which sold $21 billion worth of bonds, suffered a loss of $1.8 billion.

If the attempt to cover losses through capital increases is not successful, which is extremely difficult in the face of the upcoming bankruptcy for potential new shareholders, then the options are necessarily limited to forced sale and liquidation.

Lastly, our own banking system is fairly well protected by a tight regulatory framework, with a very good deposit-to-loan ratio, reduced non-performing loans and controlled public debt, long-term repayment, stable interest rates. rates and manageable private debt. All this, of course, helps to make our country less vulnerable to possible fluctuations in international markets, although, of course, this does not mean that there should not be constant vigilance and control over developments in the international environment.

Mr. Antonis Zairis is Vice Vice President of SELPE, Associate Professor of Business Administration at Neapolis University in Cyprus, Member of the American Economists Association (AEA) and Senior Member of the World Economic Forum (WEF).