World economy decoupling is gonna happen or not?
It is already happening in the numbers and this is the challenge that european countries are facing. We have negatives GDP growth for all western countries except China where the IMF predicts around two points or something, but China was quite conservative and i think would probably grow by 3%.
Some of the european countries like italy and germany have an high reliance on export and this means that we are caught into a situation: on one hand Italy would also like to have an economy thatrelies on domestic demand on the other hand domestic demand is going to be weak, so we have to rely on exports. In the long term we would like to detach ourselves from domestic demand just like it happened in the case of China.
Let’s look at what has happened and maybe a few people know that since 2010 until 2020, China export to GDP ratio has gone down from roughly 26% to the 18% in 2020.
Instead italy has seen the it’s a value of export to gdp growing almost to 31%, so the curve has been inverted. China has already done its the coupling from the world making it’s economy more reliant on domestic demand less on exports, Italy unfortunately with the weak domestic demand over the last 20 years, since the entrance of the Europe, has only been able to sustain GDP thanks to this growth in export which has made the economy float for two decades, but now it has made our economy rely too much on external demand and therefore exposed to external shocks.
So what we need to do? We have a problem here: long term versus short term goals, in the short term we have to unfortunately continue to rely on export and that’s why i suggest, what i call it a core and a satellite strategy. The core strategy is that where we need to continue to maintain export with our european partners and the United States that represent more than half of our total exports, stronger but little growth, that’s the core part. The satellite is we need to expand more aggressively into asian markets where we don’t do very well but where the growth of prospects are much higher, so on one hand maintain current share in the european union and in the west in the US and at the same time push into Asia. This is again a tactical decision short-term to get export to make our economy survive a little bit longer while at the same time we implement the policy to stimulate the domestic demand the wood kick-in after five years. So we are caught into this dilemma and this is why i think this current satellite strategy could be one possible solution to get an antibiotic for the time being in while we wait for the cure for the true long-term problem.