Over the past three years global economy handled three dramatic shocks incredibly well. Initially, now that China managed to acquire immunity, the pandemic is no longer an obstacle to the work of the world economy. Secondly, Putin’s attempt to blackmail her Europe failed to leave Ukraine. Despite the sharp drop in energy imports from Russia, this winter Europe has successfully coped with the situation. Finally, while inflation remains high on both sides of the Atlantic, it has begun to decline significantly. Partly because the turmoil hit different countries to varying degrees, monetary policy became very different. For example, at the start of the pandemic, the US had a much more expansionary monetary policy than Europe. Although large countries influence each other, the outlook for economic performance differs from country to country.

Economic conditions have so far kept their economies resilient USA. Employment supports consumer spending, but the economy is losing momentum due to the tightening of monetary policy by the Fed. Banks, for their part, are tightening lending conditions in response to banking turmoil and in anticipation of tightening regulations. This results in a mild recession, although rising consumption and stabilizing property prices could offset the deteriorating business environment and prevent a fall in real GDP.

In China, subdued consumer demand and rising exports have fueled post-pandemic growth. However, this will not last long. The excesses recorded in real estate still have a long way to go before they dissipate, thereby burdening consumers. Unfavorable demographic conditions and the government’s tough approach to the economy limit growth prospects. In other words, we expect a significant decline in the dynamics of the Chinese economy from next year.

After a winter of prolonged stagflation, strong demand for services is likely to allow the economy to grow slightly in the coming quarters, despite a slight recession in the US and tighter credit conditions.

* Messrs. Holger Schmieding, Miki Levy and Calum Pickering are economists at Berenberg Bank.