World Economic Forum gurus warn against countries with “high debt and political polarization”

The gurus surveyed by the World Economic Forum see an improvement in the international economy, but warn of two threats: debt and political tension. They are therefore particularly pessimistic about the countries that suffer the most from both problems. “Leading economists point to stabilization, but warn of debt and political polarization”the Forum titles its statement.

This is a survey of the chief economists of some of the world’s leading research services and they conclude that “Moderating inflation and strong global trade are fuelling cautious optimism about the recovery, but high debt levels are becoming a growing concern”. And this is true “in both advanced economies (53% of respondents) and developing economies (64%)”, according to this report published by the Forum that meets annually in Davos.

This document, together with the one also published this Wednesday by the OECD, in which Spain’s growth is highlighted, shows the lights and shadows of the Spanish economy.

In the short term, there is an optimistic forecast of growth, well above the rest of European economies, as the OECD points out, but at the same time, it is a country mired in the two problems that can most hinder this same improvement in Gross Domestic Product. On the one hand, the high debt, over 100% of GDP, which places Spain in the leading international group, although below Italy and France. The deterioration in the latter is allowing its risk premium to equal that of Spain, while Portugal now comfortably surpasses both countries. On the other hand, the sharpening of political polarization in the country with great weakness of the Government with its investiture partners, who it prioritizes over the main opposition party in trying to push through budgets and reforms.

According to the Forum report, which does not expressly mention Spain, “Debt levels and fiscal challenges are putting significant pressure on economies around the world, making them vulnerable to future crises. A growing concern is the possibility of a “fiscal squeeze,” where rising debt-servicing costs restrict governments from investing in essential sectors such as infrastructure, education and health care.

“The global economy may be stabilising, but fiscal challenges continue to pose significant risks,” he said. Saadia ZahidiManaging Director of the World Economic Forum. “Addressing these challenges requires coordinated efforts by policymakers and relevant stakeholders to ensure that economic recovery is not undermined by these pressures. Now is the time to find pragmatic solutions that can strengthen both fiscal resilience and long-term growth.

According to the survey, “Europe is once again the region that is lagging the most, with almost three-quarters of respondents expecting weak growth this year.” Spain is leading the way on the Old Continent, but it is not immune to the difficulties of its partners, which accentuates this downward risk in growth forecasts. “A number of factors are contributing to Europe’s sluggishness: political uncertainty in many countries”the report notes, and the fact that it is prevalent “in two of the region’s largest countries, Germany and France, makes it particularly difficult” for the EU to articulate “an effective and coherent strategy” to stimulate growth.