untitled design

Eurobank: Widening of the goods deficit, slowing of the processing in the first quarter

The disturbance caused by the rise in energy prices has already been felt, notes the Eurobank in its weekly bulletin “7 Days Economy”, adding that it is already reflected in the deterioration of the commodity balance due to the increase in import prices compared to the corresponding exports. the slowdown in production in manufacturing due to rising production costs and the deterioration of the economic climate and consumer confidence due to the sharp rise in inflation.

According to the bank, the period from the end of February 2022 until today is characterized by the escalation of the energy crisis due to military operations on the Ukrainian front and the consequent sanctions on Russia by Western countries. At the same time, the restrictive measures applied in China to combat the pandemic create additional barriers to international trade and ultimately supply.

These real shocks are expected to have an impact on the growth rate of most economies worldwide. According to Eurostat preliminary estimates, the quarterly real growth rate in the Eurozone slowed marginally to 0.2% in the first quarter of 2022 from 0.3% in the fourth quarter of 2021. In 7 of the 11 EU-27 countries for which Eurostat quoted data, the quarterly change in real GDP slowed down in the first quarter of 2022, in others mild (Belgium and the Czech Republic) to others more steep (Spain and France), in two it was negative (Italy and Sweden) and only in three strongly positive (Latvia, Austria and Portugal).

In the case of the Greek economy, as Eurobank points out, the disturbance of the rise in energy prices is already reflected in the deterioration of the commodity balance due to the increase in import prices compared to the corresponding exports, in the slowdown in production due to the increase in costs. deteriorating economic climate and consumer confidence due to high inflation. These results are expected to offset to some extent the positive impact on the growth rate of the Greek economy in 2022, 1st from the base statistical impact of 2021, 2nd from the resources of the Recovery and Resilience Fund and 3rd from the strong recovery of incoming travel traffic .

The widening of the commodity balance deficit is at a record high for the second quarter in a row

The Greek economy, due to its high degree of dependence on energy imports, bears a significant cost from the increase in oil and gas prices, notes Eurobank. Maintaining the same level of imports requires sacrificing more resources. According to ELSTAT trade data, exports of goods (demand for domestic products from abroad) amounted to € 11.6 billion at current prices in the first quarter of 2022, strengthened on an annual basis by 32.0% or € 2.8 During the same period, imports of goods (demand for foreign products from domestic entities) amounted to € 20.1 billion at current prices, recording an annual increase of 48.3% or € 6.5 billion. 46.6% of petroleum products (€ 3.0 billion) and 53.1% of the non-petroleum and ships category (€ 3.5 billion), reflecting the rise in oil prices and the high content of imports into the components of domestic demand and inputs of domestic production.

As a result, the trade deficit widened on an annual basis by 78.7% or € 3.7 billion in the first quarter of 2022. The aforementioned gap between imports and exports of goods is the highest ever recorded in the period from January 2005 to March 2022. The previous record high was recorded in the 4th quarter of 2021, ie the immediately preceding quarter, with the deficit widening by € 3.3 billion. Therefore, the commodity balance is estimated to have a negative contribution in the annual growth rate of the 1st quarter 2022, as happened in the 4th quarter 2021.

Strong decline in economic climate indicators and consumer confidence

Despite the geopolitical tensions that preceded February 24, 2022, Eurobank notes that the war in Ukraine was unexpected for the general public. Russia’s invasion of Ukraine has changed for the worse the basic scenario for the course of the world economies, caused fear, increased uncertainty and boosted inflation expectations, at least for the short term.

In the case of Greece, the above developments led to a sharp decline in the consumer confidence index in March 2022 (monthly decline of 12.5 points) and the general economic climate index in April 2022 (monthly decline of 7.1 points). The March and April 2022 observations rank in the top five negative monthly disturbances, just months after events such as the 1st lockdown of the COVID-19 coronavirus pandemic, the terrorist attack on the Twin Towers in New York and its signing. 3rd Economic Adjustment Program.

Consequently, with inflation climbing to 9.1% in April 2022 and eroding the purchasing power of household income and expectations of a sharp deterioration, the downside risks to private consumption increase (in Spain and France, private consumption decreased on a quarterly basis by 3.6% and 1.2% respectively in the 1st quarter 2022). Measures to support economic policy makers are expected to mitigate to some extent the effects of the above disturbances.

Slowing production in processing

Finally, Eurobank notes that the manufacturing index in manufacturing, after 6 consecutive quarters of upward trend on a quarterly basis, shrank by 1.0% QoQ in the first quarter of 2022 from an increase of 3.6% QoQ in the fourth quarter of 2021. In annual terms , manufacturing output slowed to 4.8% YoY in Q1 2022 from 9.9% YoY in Q4 2021. Rising production costs due to rising energy prices pose a significant downside risk to output in processing in 2022. On the other hand, geopolitical developments through the changes they bring to the international markets of intermediate and final processing products also create opportunities.

Source: Capital

You may also like

NZD/USD falls on dovish RBNZ stance
Markets
Joshua

NZD/USD falls on dovish RBNZ stance

RBNZ Governor Orr was dovish, which seems to put pressure on the New Zealand Dollar. GDP and initial jobless claims

Get the latest

Stay Informed: Get the Latest Updates and Insights

 

Most popular