The world economy is not fulfilling its potential

Luc Williams

The discussion on the global economy “Global economy debate”, led by Anna Gromada, a sociologist and economist, was attended by: Marek Belka, MEP, former Prime Minister of the Republic of Poland, Marcin Gadomski, vice-president of the management board of Bank Pekao SA supervising the risk management department, Maciej Reluga, member of the Management Board of Santander Bank Polska SA, head of the financial management department and the bank's chief economist, Adam Manikowski, vice-president of the management board and managing director of Żabka Polska, and Piotr Arak, chief economist of VeloBank.

Opening the discussion, Anna Gromada recalled the words of the Impact guest from a year ago, prof. Nassim Taleb: “Even if geopolitical forces continue to tear our world apart, what will continue to hold us together is trade,” and contrasted this with the upcoming US presidential election. In this context, Anna Gromada mentioned last year's book – the economic manifesto – by Robert Lighthizer, former US Trade Representative (USTR) in Donald Trump's cabinet, “No Trade is Free” and asked everyone the participant for a bird's eye view of the economic situation in the world today.

Problems of the great

– If we talk about destabilization of the global economy, we first mean political destabilization. But it is not everything. Perhaps more important, more fundamental, is destabilization in the strictly economic sense. Let's look at the three great, most important economic powers. In the United States, the social contract, which in recent decades was maintained somewhat by prosthetics, is actually degenerating. As a result, economic inequality is growing. China – fantastic economic growth, demographic paralysis, dependence on exports, huge, irrational savings, dependence of the economy on the real estate sector – in effect, it is also a colossus with legs of clay. And in the middle is poor Europe, which has to change its business model because it can no longer count on cheap imports of raw materials and energy from Russia and very profitable exports to China – Marek Belka outlined the current global map of challenges.

He added that the most obvious path to Europe's development is high technologies. But this requires huge financing and a risk culture.

Marcin Gadomski, on the other hand, defined: the world economy is subdued.

– All major regions of the world are developing below their potential – said the vice-president of the management board of Bank Pekao SA

He also drew attention to the poor situation of the Old Continent.

– Europe faces demographic challenges, it cannot keep up with the technological revolution, we do not have any champions in the area of ​​new technologies and IT. It also behaves very conservatively compared to the United States. The level of savings in Europe is growing, there is a large mountain of money in private wallets, which Europeans are not very willing to spend, fearing for the future, said Marcin Gadomski.

Adam Manikowski, commenting on the situation in the global economy, referred directly to Nassim Taleb, who talked about “black swans”, i.e. unexpected events of great importance for the global economy. As he said, we are in an unprecedented situation because in the last few years the world has encountered two such “black swans”, the COVID pandemic and the war in Ukraine. This resulted in, among other things, increases in prices of energy and raw materials, the pandemic caused a recession in many economies, and the war in Ukraine caused turmoil in international trade. He also drew attention to the collapse of China's growth.

Piotr Arak assessed that the peak of globalization was reached in 2008. Since then, it has not progressed any further, at least in terms of the ratio of export volume to global GDP. For this reason, China had to switch to internal growth and financing infrastructure investments. According to the former director of the Polish Economic Institute, the mere arrival of Donald Trump to the White House does not change anything.

– The trade policy of the Biden administration and the Democrats is the same. Nicer, more refined, less noisy, but when it comes to the decisions themselves, such as the announced introduction of 100% tariffs. for electric cars from China and a number of other products related to renewable energy sources, it turns out that nothing has changed – noted Piotr Arak.

Maciej Reluga, on the other hand, drew attention to the situation on labor markets. In many countries it is stable and, even considering what the global economy has been going through, surprisingly good.

Consequences for Poland

The issue of the consequences of global events for the Polish economy also appeared at the center of the discussion.

– In Europe, we have a weakness in particular for our main trading partner, Germany. The most important question is – and this will probably become clear in a few years – whether the weaknesses of the German economy result from the timing of the cycle and whether they are cyclical or rather structural, said Maciej Reluga.

He added that the latter would bring different consequences in Europe and Poland.

– The problem of the Polish economy is primarily – and this has not changed for years – that we are mainly assembly plants and subcontractors, we do not have our own brands – noted Marcin Gadomski.

He added that in many areas we lack our own technological ideas.

Banks are monitoring the demand for loans. As the Pekao representative said, in the case of an investment loan it is flat.

– This is due to high interest rates and investment uncertainty. When it comes to consumption and loans, if we look at Poland, it is not the worst, he said, emphasizing the impact of high employment on this fact.

– However, if we want to look for opportunities for ourselves, we must look for them in the main trends. This is a matter of regionalization. We have an example of Intel's investment in Poland. There are products that Europe uses heavily and are still made in Asia. These are, for example, substances for the pharmaceutical industry – pointed out the vice-president of the management board of Bank Pekao SA

He added that although people talk about it, not much is happening at the European level. The United States has already entered the path of a trade war with China since Donald Trump's presidency. Meanwhile, trade between France and Germany with China is constantly deepening.

– Another trend is the climate transformation. Please note that over 50 percent the technologies that are needed for us to have a low-carbon economy have not yet been invented. This is definitely an area where you can look for your opportunities. Poland is very strong in batteries, much more advanced devices are needed. There is a whole range of technologies that can be talked about in this context – analyzed Marcin Gadomski.

Finally, another area that the vice president of the management board of Bank Pekao SA drew attention to is security. This is another chance. The vice president of the bank, which, among other things, finances the expansion of Polish entrepreneurs, gave an example from his own backyard.

– We finance companies that are very good at drone control and detection technologies – he said.

However, he added, also in the case of security on a European scale, there is a problem of dependence, which is visible in the area of ​​cybersecurity solutions imported from Asia.

The moderator of the discussion also asked about the “de-dollarization” of the global economy, directing this question to the former head of the Polish central bank – Marek Belka.

– When we think about de-dollarization, we think about China's aggression – and a huge increase in the volume of trade in yuan. But if we look at the structure of foreign exchange reserves, the yuan is less important than the Australian dollar or the Canadian dollar. As long as China uses its currency for internal economic purposes, the yuan will not be the world currency, explained Marek Belka.

He also referred to the issue of gold as a reserve – as he said, when we enter the euro zone, we will not need this metal for anything.

Untapped opportunities

The slowdown in globalization cannot be considered good news, but it does mean that there is untapped potential in the context of economic development.

– Why don't we, as the European Union, have a free trade agreement with the United States? Why don't we have such an agreement with India, for example? – Piotr Arak asked questions.

He pointed out that India could be treated as a backup (a type of security, support – editor) in many areas. He emphasized that each year the ratio of the European Union's gross domestic product to the global one is becoming smaller and smaller.

– Every year we become less important economically as a continent. Therefore, from the perspective of a player such as China or the United States, which is developing much faster, our continent is a bit of an open-air museum when it comes to discussions on certain topics, not always taken seriously – noted Piotr Arak.

He stated that in 10 years the EU will weigh less in the global economy, although – as he added – Poland will weigh more in the European Union.

photo: press materials


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