Economist Nikos Vettas: Are we getting the balance right between interest rates, inflation and growth?

The 15th Limassol Economic Forum has kicked off at Parklane Resort & Spa with the General Director of the Foundation for Economic and Industrial Research and university professor Nikos Vettas, who posed the question: are we getting the balance right between interest rates, inflation and growth?

He said that even though the global and European economies have been recovering and inflation has levelled, he is not expecting market prices to drop in the next decade.

Global trade, even though it has levelled the last several quarters, it is still very strong, Vettas added. Yet, Europe has been underperforming and its economy continues to be weak in comparison to that of the US and China.

He estimates that inflation will level out at 3% and this is not due to monetary issues but instead global demand and supply. “Prices will not be lower over the next 10 years; they will be higher,” he estimated.

Another weak spot for Europe, according to Vettas, is that it is lagging when it comes to technology and manufacturing.

And in terms of the green transition, Vettas says Europeans feel like they contribute the least to global warming yet pay the most towards fixing it. “They feel, why should we be driving this?”.

However, he stressed that the amount of money that has to be put aside for climate adaptation, which is happening whether we like it or not, is very significant and for the moment we are not putting this money aside.

During the last 15 years or so, the global economy has shown amazing resilience through a series of crises, he said. “The global economy has shown that it has a huge stomach and it can swallow pretty much everything,” said Vettas. At the same time, year by year the risk of investing is getting higher, he added.

He believes that Europe is very slow in integrating technology into production, which is not going to change from one year to the next.