OPINION – Reverse gear

There was a measure of heightened expectation about the publication of the Gross Domestic Product figures for the third quarter of the year. As many will remember, after a calamitous drop following the outburst of the pandemic, the economy seemed to start picking up at a relatively fast pace in the second semester of 2020.

Notably, compared to each of the previous quarters, the economy rose in the last two quarters of that year by 12 percent and 58 percent, respectively. 

If the trend observed then had stood, we might expect some sort of normalization by the end of this year. Even a comparatively modest average quarter-on-quarter growth might provide a return to a kind of normalcy. However, the recovery stalled in the first semester of the current year. That fact naturally raised interrogations about the signals that the third quarter might provide. 

The latest figures are not such that one might start celebrating. The upward economic trend seen earlier stopped at about half the size the GDP level had before the slump. If anything, the third quarter confirms that the recovery has halted. Moreover, if we take as reference the figure for the last quarter of 2020, the overall trend is even pointing slightly downward. 

That trend reversal is also visible in the figures for private consumption, the component that is of most immediate interest for the general welfare of the residents. Indeed, consumption of services seems to stand mow back at values like those seen before the crisis.

But both the consumption of food and beverages, on the side, and all types of consumer goods, durable and non-durable, on the other side, are trending down again. In the absence of any renewed dynamics on the investment side, private demand is unlikely to provide any sustained impetus for the recovery. 

On a short-term timeframe, the weakened private demand might be compensated, up to a point, by increased public activity. But neither public consumption nor public investment shows the impetus to make a noticeable difference. Although they typically rise by the last semester – the execution of the public budget obliges – such rise is unlikely to change the overall mood.

With the economy closed for the foreseeable horizon to all sources of visitors except mainland China and the level of uncertainties raised by the overall approach to Covid prevention, it is certainly too soon to plan for the celebration.