The prospects for inflation and travel were analyzed by the CEO of VISA Europe

"The optimism about economic growth that followed the pandemic seems to be derailed after the Russian invasion of Ukraine with significant consequences in some areas"

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The optimism about economic growth that followed the pandemic seems to be derailed after the Russian invasion of Ukraine with significant consequences in some areas, said VISA Europe Chief Economist Adolf Lorenti in a discussion organized by the Association of Economists in Cyprus. with the Cyprus Economic Society and VISA Europe.

In the debate entitled "Economic Outlook for 2022: The Return of Optimism, Derailed", Mr Lorendi emphasized the effects of the war on the supply chain and energy markets. Russia and Ukraine, he said, are major exporters of natural resources, agricultural products and industrial materials.

The war, he added, has major economic implications for supply chains, energy prices and inflation, consumer confidence, and travel. He also noted that Russia, apart from energy, is not an important trading partner for most European countries, while there is some exposure of European banks in countries such as France, Italy and Austria. At the same time, he noted that foreign direct investment in both Russia and Ukraine is negatively affected.

He described inflation at 6-8% in Europe as a challenge for the immediate future. He noted that inflation is driven by factors such as disruption of supply chains due to COVID and geopolitical tensions in energy markets. As for the forecast for inflation in Europe, he said he was somewhat more optimistic about the outlook for the United Kingdom. He acknowledged that energy prices were shocking, but said that unless they continued to rise at the same rate each month, which he did not expect, then in the second quarter of 2023 there would be a reduction in inflation as prices stabilized or and will decrease in relation to the large increase of the previous year.

With regard to inflation due to supply chain disruption, he said it would take longer and depend on how long China maintains its zero-COVID policy and how long imports of components and raw materials from other countries begin. such as Latin America and Africa.

However, he said he was less optimistic about the return on consumption and disposable income of households, which will also be affected by inflation. Despite the increase in deposits during the pandemic, which could help, as Mr. Lorendi noted, these are not evenly distributed and mainly concern the most affluent households.

As for travel, he said it is negatively affected by three factors, which are trust, disposable income and deposits. He also said that there is still a strong demand for travel. He predicted that in 2022 domestic destinations will continue to do well, consumers will be wary of European destinations, American travelers but not Chinese will return, and questions are being raised about how teleworking or returning to the office affects travel.

Finally, he stressed the importance of maintaining the middle class internationally in order to overcome the crisis of 2020 to 2024, something that, as he said, if not done, the crisis will be prolonged, something that would have a negative impact in many areas.

Source: KYPE