Text by Pyr Marcondes, Senior Partner at Pipeline Capital.
Technically, in economic semantics, recessions are characterized by two quarters followed by high inflation, mass layoffs, low consumption, the same GDP, and so on. We’ve lived through scenes like this. The world too.
Well, that way, despite the insistent predictions I read in the economic and business press around the world, I don’t believe that this will happen now in 2023.
On the contrary, I believe that we are heading towards a picture of a first quarter that is still one of apprehension and alarmism, which will begin to dissolve in the second. In the third, we will have signs that maybe, in fact, I might even be right, and that the shadow of the recession was a dark cloud, which passed over our heads, but did not generate any storm. And we will end the year realizing that 2023 wasn’t even that bad, and that, in fact, we even had a much better year than expected and projected at this very moment when I write and you read me.
I haven’t seen idiots like me who believe that.
I have evidence, however, to assert what I assert.
A World Bank report qualifies what we are going to experience this year, in English, as a “downturn not a recession”. Aeeee!!!
Inflation indices in the US, the driving force behind a relevant part of the global economy, are beginning to show signs of stabilization. Of course, because of the Fed’s tightening, but it’s starting to work.
The financial and investment market already knows that the US Central Bank will continue to squeeze the economy until inflationary control indicators appear more consistent. But they have already made their projections and calculations and expect a total interest rate increase of up to 5%. We are heading towards that, perhaps, but the fact is that not even the most alarmists and conservatives believe that we will pass this level and the number (bad, it is true) is already in the spreadsheets. There will be no fright, no panic on Wall Street. And again, no recession.
Still in the North American economy, with the highest interest rates, one of the solutions for companies is to fire people, and this is actually happening. Big time.
The pain of any layoff is hateful and sad too, but also in this case, the unemployment rates that seemed to be heading for an explosion, actually indicating a harbinger of potential recession, are not in frank and exponential growth. The first surveys on layoffs and unemployment this year are coming out these days in the US and then we’ll see where these indicators point.
The harmful impacts (in all senses) of the war in Ukraine were in part already absorbed by the nations and economies, as it were. The reflexes are still alive and spread their evils in Europe and around the world, but as I said, each country is after its own alternatives, particularly in terms of energy matrix. And life goes on. Bad. Much worse than before. But this is not a recession.
Regardless of the political bias, I also believe that a recessive scenario will not be installed in Brazil this year.
I have already made countless predictions in my life of almost 50 years as a journalist and columnist. Most of them I hoped were wrong, because they predicted bad things in the future, which sometimes ended up consolidating. I hated being right.
This time I will love to get it right.
On December 31st, cover me. We pass the ruler and let’s see what happened.
Text by Pyr Marcondes, Senior Partner at Pipeline Capital.
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