Publications - Monographs and Scientific Edited Books

The implemented economic strategy in advanced economies, which is based on the monetary policy of quantitative easing and fiscal expansion in the form of stimulating aggregate demand weakened by antipandemic measures, leads to increasing inflationary pressures throughout the globalized world economy. As it turns out, in the medium term, the effects of these steps towards higher inflation will be combined with growing demand for raw materials and food, causing imbalances on the supply side. This will ultimately, together with the high indebtedness of economic subjects, slow down the potential growth of gross domestic product. These risks bring the world economy closer to stagflation and the debt crisis.

During the last year economic growth slowed down more than during the previous recession in 2009, due to largescale anti-pandemic measures as well as a larger imbalance between supply and demand. As our research has shown, governments´ responses to the SARS-CoV-2 delta variants in this situation have further increased companies´ costs, slowed economic growth and reduced labor supply. On the supply side, the services sector, which is crucial for the creation of gross domestic product in developed economies, was thus most affected. Inflation is also boosted by lack of key production inputs, such as semiconductors, which weakens supply in the automotive and electronics industries, for example.

The responsible authorities have to decide whether to pursue loose monetary and fiscal policies that contribute to higher inflationary pressures, or to mitigate these pressures by tightening monetary and fiscal policies, thus reducing aggregate demand and weakening economic growth. As it turns out, on the fiscal policy side, expansion will continue in the medium term. In particular, we can see the development of action plans that are being prepared in three key regions of the world, in China, in the United States and in the European Union. The situation is similar with monetary expansion, which should continue in both the US and the euro area. Even if higher inflation rates continue, it is unlikely that the Fed or the ECB will make a significant reduction in quantitative easing policies. This is because it is directly connected and corresponds to a large increase in private and public debt. Tightening monetary policy could thus most likely trigger a debt crisis, which governments in advanced economies want to avoid.

In the current period and in the short term, the development of the world economy will continue to be connected with the epidemic of the SARS-CoV-2 virus, which affected the development of the economy in both developed and emerging economies. Despite the common factors affecting the economies (e.g. inflation, population aging, SARS-CoV-2 virus, polarization of possibilities etc.), the development in individual countries and regions of the world is not the same. In several economies, we expect gross domestic product to return to precrisis levels as early as 2021, and the economy should be supported mainly by a recovery in household consumption and growth in fixed capital investment through improved business confidence and the implementation of large public investment projects. Changes in household behavior and consumer preferences will persist. Likewise, population aging and income inequality will continue to negatively affect growth potential, especially in advanced economies.

From the point of view of the development of the world economy in the short and medium term, it is therefore important to what extent economic subjects and structures will be able to return to state before the corona crisis. It is very likely that some of the mentioned factors will be persisted for a long time and the economy will not be the same as before. Geopolitical tensions remain an important risk to the ongoing economic cycle, especially in relation to China and Russia. This is reflected not only in stronger protectionism in international trade, but also in the implementation of new strategic plans to weaken the transfer of sensitive technologies and dependence on imports of certain raw materials or important components for production.

The main regions of the world economy have responded to the pandemic challenge as to an opportunity for change to strengthen competitiveness, the domestic production base, ecology and social justice. From shortterm economic support, which was focused primarily on immediate relief and mitigation of the consequences of the pandemic itself and the countermeasures taken, economies and governments are now moving to support the economic potential for longterm sustainable economic growth. The current development has significantly accelerated and deepened the transformation of the consumption of social work, which had already taken place before, but it was not until the corona crisis that this process moved further to a phase from which there is probably no return to position and structures as before.

The economic cycle in the world economy rebounded from the bottom faster than generally expected, mainly due to the impact of large fiscal stimulus. New development strategies are very similar in that they reflect efforts to improve the social situation of households, greater real convergence to reduce economic disparities between regions, as well as efforts to mitigate the negative effects of economic growth on the environment. Despite the expected economic recovery, a high degree of divergence, polarization, inequality and, above all, a high degree of uncertainty will persist between economies and economic agents. In the process of transformation to a new social model based on a green, digital and socially just economy, all states should cooperate with each other.