Page 7 - bne magazine February 2024_20240206

bne February 2024 Companies & Markets I 7
weakening. In addition, households will have to repay more on their loans due to rising interest rates, which will also dampen consumption. Some government measures which were introduced to support households against high inflation will also be abolished in 2024, further depressing consumption.
But growth is expected to rebound in the second half of the year on the back of a gradual easing of monetary policy and a pick-up in external demand.
“Overall, we expect the Portuguese economy to grow by 0.8% on average in 2024, which is above our euro area forecast but well below last year's 2.1% growth. In 2025, we expect growth to accelerate again to 2.2%,” says ING.
Portuguese economy in a nutshell
Source: Thomson Reuters, all forecasts ING estimates
How exposed is the EU to the fragmentation
of the global trade regime?
Ben Aris in Berlin
The world’s economic system is going through some profound and rapid changes. Since the start of the
war in Ukraine, the energy markets have been totally rebuilt to everyone’s cost. Oil that used to travel a few days from Russia’s port of Primorsk to the EU’s Rotterdam now has to travel half way around the world to refineries in China and India before travelling back to Europe as oil products once it has been whitewashed of its Russian origin.
The globalisation of the last decade was already upended by the coronacrisis as companies looked to shorten supply changes after the pandemic. Globalisation had led to a decade-long period of prosperity, but the sudden acceleration of geopolitical tensions that Russian President Vladimir Putin catalysed with this war of aggression has only made things worse. And those tensions were already rising as the US increasingly clashed with China. In his first speech as Secretary of State in 2021, Antony Blinken made it clear that while Russia was an enemy, China was a rival that needed to be challenged.
As bne IntelliNews detailed in a deep dive into Russia's deepening relations with the global south, the sanctions showdown has only accelerated what the International Monetary Fund (IMF) called Geoeconomic fragmentation (GEF) in a paper in November that looked at the risks for the EU.
“The number of restrictions worldwide with effects on cross-border trade and foreign direct investment (FDI) have risen sharply in recent years,” the IMF said. “Investment and financial flows are increasingly driven by geopolitical alignment, rather than economic distance. Some trade is being re-routed through third countries, and production
is beginning to relocate as companies grow increasingly
concerned about the reliability of foreign links in their supply chains.” Capital Economics has also done extensive research on this new fractured world, as reported by bne IntelliNews, which in effect reversed globalisation and is becoming the dominant issue for the global economy.
The sanctions against Russia have largely failed and the remaking of the global trade system is now a distortion that is driving up costs everywhere. As bne IntelliNews reported, the subsequent boomerang effect is now hurting the EU more than Russia. This will probably change in the long term, but in the short term the European economies are slowing, while that of Russia is enjoying a military Keynesianism boost.
“Russia’s invasion of Ukraine highlighted the national security implications of concentrated sourcing of key imports. Domestic competitiveness, supply chain resilience and climate change are also driving the global increase in GEF policies,” the IMF said.
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