Although the US, UK and Europe have faced similar problems over the past year and a half, there are some surprising differences between them.
One and a half years after the outbreak of the COVID-19 epidemic, the world has had to deal with the strict controls of national economies to protect the health of the population. It was already difficult for those who thought the world economy was bad. While vaccinating the population seemed to help restart the already deteriorating economies of the states, new problems began to emerge, and the world had to face other negative consequences, such as the energy crisis. TopForex looked at how specific economies in Europe, the UK and the US are performing.
The European economy, which has recently begun to recover from the effects of the epidemic, is already facing a challenge and an energy crisis. The reason? The so-called water shortage in the water reservoirs in Scandinavia has increased the demand for electricity as Europe’s green battery and economy resumed. As winter approaches, experts fear supply problems, which depend on Europe’s fossil fuels. In this situation the already record price may increase further.
Therefore, MEP Christopher Gritler proposes a reform of the European energy market in line with the Green Accord and breaks the link between electricity and gas prices. But in practice the problem with this proposal is the lack of energy from renewable sources. According to the EIA, fossil fuels still account for more than three-quarters of global energy demand. Only one-fifth is renewable.
At the same time, the International Monetary Fund (IMF) has adjusted its outlook for the world economy due to the third wave of the epidemic. However, despite the current energy crisis, the eurozone economy is expected to grow by 5 percent this year and 4.3 percent by 2022, he said.
At the same time, rising inflation accelerated growth this year, and experts expect it to last longer than expected. Glasnot, a member of the European Central Bank’s executive council, said inflation could exceed expectations in the short and medium term. Nevertheless, under the ECB’s basic premise, eurozone inflation is expected to rise to 4% by the end of the year (the highest in about 10 years) and then fall below the 2% target again in 2022. Whether this scenario is fulfilled or the truth shows a different end, we obviously have to wait a while. Figures from September 2021 are up 0.4 percentage points from August to 3.4 percent.
Unemployment has risen in EU countries this year. It is highest in Greece and Spain, where, according to data from Statista.com, it reached 15.1 percent in June, while unemployment was lowest in the Czech Republic, where it was 2.8 percent.
The United Kingdom is undoubtedly one of the most watched countries by the energy crisis. Who would say that? Until recently, it was the stronghold of Europe, and today it is battling a deep energy crisis. Petrol and diesel ran out in the UK in September, and 90 per cent of petrol stations had no way to sell fuel because their products were inactive. Thus fuel prices reached a 14-year high. The situation was exacerbated by the panic of residents who began to buy shops where the shelves were empty. In addition, the reason for the shortage of fuel and supplies in grocery stores is really ridiculous – the lack of truck drivers delivering not only fuel but also food to the country. At the same time, the country’s fuel reserves are adequate.
According to the British Bureau of Statistics, 17 per cent of the eight million Britons have not been able to buy some staple food in recent weeks. While locals are getting used to empty shelves due to blackouts, some in the world are shaking their heads incomprehensibly.
The government has been criticized for failing to provide enough manpower to offset the post-Brexit operation. That is not the only problem in the country. According to S&P Global Platts, gas prices in the country have risen by 420 percent. Due to its scarcity, global gas prices will rise, winter will significantly increase its consumption, and Britain will be able to save only a small amount (thus depending on the supply of other countries) in the coming winter, they do not look very pink.
Britain did not pass the rise in inflation. According to the National Bureau of Statistics, the annual inflation rate rose to 3.2 percent in August from 2 percent in August and the unemployment rate to 4.5 percent, down from 0.1 percent in July.
United States (United States)
The IMF cut its forecast for US economic growth for this year by 1 percentage point to 6 percent. It expects a small expansion of 5.2 percent next year. The main reason is the poor state of the local economy.
Nevertheless, economic growth accelerated faster than expected in the second quarter of 2021. At the end of September, the Ministry of Commerce’s GDP per capita growth was 6.7 percent.
On the other hand, companies and the unemployed should realize that this good decision was supported by the comprehensive incentives provided by the government to support the economy in the fight against the epidemic. However, these projects are coming to an end or are over, and another wave of the epidemic is encouraging people to travel and shop, visit restaurants, which could lead to a resurgence in economic activity in the future, not to mention supply chain problems. This is one reason why the International Monetary Fund’s outlook is skeptical. Most economists predict that in the third quarter, growth in the local economy will increase “only” by 4 percent.
Unemployment reached 4.8 percent, up from 7.9 percent in the same period last year, but inflation is likely to be higher than at first, says Jerome Powell, chairman of the central bank. According to the U.S. Bureau of Labor Statistics, annual inflation in the states reached a 13-year high in September 2021, rising to 5.4 percent from 5.3 percent in August. In September 2020, it was 1.4 percent.
Inflation has undoubtedly been hit by rising energy prices, affecting the world economy and not surpassing the United States. Year-on-year, their prices rose 24.8 percent, which is related to a sharp rise in consumer prices, which rose 4.6 percent last month.
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