In financial terms the past year has been bad for almost everyone. inflation of 10% Year after year, the rich world has slashed household incomes. Investors lost as global equity markets plunged 15%. But behind this poor overall performance, there are big differences: some countries have done quite well.
In order to be able to assess these differences, The economist has compiled data on five economic and financial indicators—bip, inflation, inflation range, stock market development and national debt – for 34 mostly rich countries. We ranked each economy based on how well it performed on each measure and created an overall score. The table below shows the ranking and contains some unexpected results.
For the first time in a while, the economic party is taking place in the Mediterranean. Greece is at the top of our list. Other countries that went into recession in the early 2010s, such as Portugal and Spain, are also doing well. Those aren’t the only pleasant surprises. Despite the political chaos, Israel did well. Meanwhile, Germany is an underperformer despite political stability. At the bottom are two Baltic countries, Estonia and Latvia, which were praised for rapid reforms in the 2010s.
GDP, usually the best measure of economic health, is our first indicator. Norway (helped by high oil prices) and Turkey (by Trade Against Sanctions with Russia) fared better than most. The consequences of Covid-19 also play a major role. Thanks to super-strict lockdowns and a collapse in inbound tourism, much of southern Europe was in dire straits a year ago. The region was in for a decent year. Tourist visits to the Balearic Islands have recently surpassed their pre-pandemic levels. As your correspondent pointed out on a recent trip, Ibiza is so crowded that it’s difficult to book a taxi or find a seat at a halfway decent restaurant.
Ireland probably had a strong year, albeit not nearly as strong as bip Numbers suggest so. The activities of large multinational companies, many of which are tax-registered there, skew the numbers. In contrast, America’s bip The numbers are misleadingly weak: statisticians struggle to account for the impact of huge stimulus packages.
More detailed data fills the picture. Our second measure is the change in price levels since the end of 2021. Away from the world’s attention, some countries have experienced rather low inflation. In Switzerland, consumer prices rose by only 3%. The central bank, supported by a strong currency, reacted quickly to the price rise earlier this year. Countries with non-Russian energy sources – like Spain, which gets its gas from Algeria – have also outperformed. Those who rely on Vladimir Putin really suffered. In Latvia, average consumer prices have increased by 20% this year.
Our third measure also relates to inflation. It calculates the proportion of items in each country’s inflation basket that have increased by more than 2% over the past year. This gives an indication of how stuck inflation is – and therefore suggests how quickly inflation will fall in 2023. However, some countries with high headline inflation were able to limit their breadth. In Italy, for example, consumer prices have risen by 11% this year, but ‘only’ two-thirds of the inflation basket shows above-target inflation. Japanese inflation also looks set to ease soon. Great Britain is in more trouble. The price of each category in his cart increases rapidly.
People’s economic well-being does not only depend on prices in shops. They also look at the value of their pension pots and their stock portfolio. It’s been a terrible year for this type of investment in some countries. Stock prices in Germany and South Korea have fallen nearly 20% this year, twice as much as in America. Swedish stocks have performed even worse. And yet there are strengths. Norway’s stock market is up year-on-year. The same is true of Britain, populated by boring, sluggish businesses that tend to be rewarded in tough economic times.
Our final measure is the percentage change in net government debt bip. In the short term, governments can cover up economic rifts by increasing spending or cutting taxes. However, this can lead to more debt and thus the need to tighten fiscal screws in the future. Some governments have invested lavishly to cope with the pressure on the cost of living. Germany provided funds worth 7% bip to help with energy costs, d.bip ratio has increased. Other countries have retreated from fiscal profligacy and helped put the fiscal ship back in order. Public debt in southern European countries appears to be on the way down.
Will the gap between the winners and losers of 2022 remain in 2023? In the near future, economic growth in southern Europe, weighed down by a rapidly aging population and high levels of debt, is certain to revert to less than stellar levels. And there are indications that in countries such as America and the UK may finally ease off high inflation and help them climb the rankings.
In other dimensions, differences may remain, not least when it comes to the countries that depend on Mr. Putin for their energy supplies. Against all odds, many of these countries managed to replenish their natural gas stocks ahead of winter — but only by paying outrageous prices. With supply now largely disrupted, 2023 will be much more difficult. That will be a problem in the Baltics, but less so on the other side of Europe. It’s hard to worry about the gas supply while eating a huge plate of squid on an Ibizan beach. ■
