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Economic activity managed to rebound firmly and across the board in Q3, but the second wave of SARS-CoV-2 infections has led to a further tightening of mobility restrictions in many countries (especially in Europe), and most indicators suggest that economic activity will contract once again in the current fourth quarter. But
how much of a contraction are we talking about?

In an environment characterised since 2020 by a string of negative disturbances, the positive surprise in 2023 was once again the resilience of the global business cycle, understood as «the ability of a living being to adapt to a disturbing agent or an adverse state or situation», according to the definition of the Royal Spanish Academy.

Despite the goal to reduce the government deficit to 3% of GDP in 2024, the Treasury’s funding needs will remain high. In addition, the market will have to absorb all the debt that is currently in the hands of the ECB and which it will not reinvest. In this context, we provide some perspective on the volume of debt that the market will have to absorb during this year.

After the experience of recent years, we know how political risk can alter the behaviour of key hypotheses in economic forecasting scenarios.

The Spanish economy continues to have the highest structural unemployment rate in the European Union, despite having managed to reduce it substantially in recent years. To curb it, improvements are needed on three fronts: greater supply and demand for employment and better matching between the two.

Having launched the most intense monetary tightening cycle of recent decades, it appears that the central banks are on track to solve the unexpected upturn in inflation which the international economy has had to cope with since the first half of 2021.

The pace of growth of the Spanish economy has slowed, as evidenced by the lower GDP growth rate recorded in Q3. The main reason for this is the weakness of the external environment: the euro area has registered a slight decline in economic activity and its three main economies are stagnant. In contrast, the statistics for household consumption in Spain, one of the pillars of the economy, remain strong.

A sense of unstable balance will dominate the performance of the economy throughout 2024 – something which we will no doubt have to get used to and which will demand considerable flexibility among economic agents when it comes to making decisions. Such are the times in which we live.

De-risking, decoupling, fracturing, reshoring, nearshoring, friendshoring... understanding the new era of globalisation

In this second article on globalisation, we analyse the growing fragmentation of the world economy in recent times, focusing on the decoupling between the US and China, and its effects.

Until not long ago, the financial markets had seemed to digest with relative ease the heavy dose of monetary tightening that the central banks have introduced to curb inflation. However, with interest rates increasingly entering restrictive territory – that is, at levels that should cool the economy – the risk of stress events and financial turbulence increases.

In many developed economies, housing prices have been rising significantly for years – a trend which only accelerated during the pandemic. However, some of those housing markets have begun to experience a correction in the current context of higher interest rates and an erosion of household real disposable income.

In the continuation of the article «Advanced economy housing markets in a scenario of tighter monetary policy (part I)» we calculate the potential adjustment in housing prices which could occur in some of the international housing markets that are showing signs of overvaluation.

The Silicon Valley Bank intervention and the shock wave it triggered throughout the rest of the international financial system has been yet another obstacle on the path towards the normalisation of the international economic cycle, it can be seen as a test for the central banks’ dual mandate.

The independence of central banks seems indisputable, even more so in these times of pandemic, in which they have increased their use of unconventional policies and provided coverage for the high funding needs of states. In this article we will explore the theory and empirical evidence supporting the importance for central banks to maintain their independence.

Once the pandemic is over, the very need to act decisively in monetary and fiscal terms will have repercussions that, depending on how these are managed, could affect the performance of economic policy in the future.

We analyse what has happened in advanced economies in terms of inflation and interest rates in order to try and gauge the likely course the central banks will take over the coming months.

In 2024, the global economy remained resilient in an environment marked by restrictive financial conditions and the major international economies managed to grow by more than expected. Nevertheless, 2025 is still set to be a challenging year: the threat of greater economic fragmentation has now been added to the risk map, with an increase in trade barriers and uncertainty.

The beginning of a new economic chapter is marked by the sensation that we may be approaching a turning point in the behaviour of the economy.