Global turmoil is an everyday reality. We live in a time when we are forced to simultaneously deal with an infectious disease pandemic, as well as the crisis that followed as a result of it, which was inevitably followed by the war in Ukraine. Every day we face questions such as future existence, inflation, a possible European gas shortage, and rising food prices – to name but a few. Vuk Vuković, founder and director of Oraclum, revealed the answers to pressing economic and life questions in a lecture entitled “Civil unrest and recession in 2023? How to survive?”
The most famous macroeconomist in the region, Vuk Vuković, started the lecture by pointing out that we are on the threshold of a recession – it is inevitable, and it is up to us to learn what to do and how to function. He added that a so-called self-fulfilling prophecy is happening, given that central banks around the world have been deliberately raising interest rates since the beginning of this year, and it was obvious what the outcome would be in some six to nine months. The first two factors that have changed are interest on home loans and interest on credit cards, of course for the worse. Vuković pointed out that here we come to the well-known formula of “interest rates up, economy down”. This complicated situation automatically affects consumer power, and as a result, citizens spend less money. Consequently, companies earn less and their earnings fall.
This year will be remembered as the year in which inflation escalated, but also as the year in which the bubble in the financial markets began to burst. We will look back on 2022 as a year in which central banks tried to bring down inflation by raising interest rates, while pushing economies into recession. In his lecture, Vuković asked himself whether inflation or recession is worse. Many believe that the war in Ukraine is the cause of inflation, but this is not true – it only amplified its effect. “Recession combined with inflation represents two evils. The lesser evil is a recession, if you have to choose one of two evils,” Vuković pointed out and added: “In this situation, central banks have to kill demand in order to kill the recession.”
Despite the coming recession, Vuković does not think that the future is so gloomy: “We have the advantage of entering the eurozone and introducing the euro. It will provide us with greater liquidity in the banking sector, which should make it impossible for banks to significantly raise interest rates”. The convergence path towards Europe will reduce risk, therefore it is expected that this recession will not be at the level of the last one in 2008. This is not the previous debt crisis, and Croatia is no longer such a risky economy. “This is the moment when you run away from everything and wait in peace with cash for this situation to end, because there is no better alternative to cash,” Vuković finished with a simple thought.
