Crédito y Caución predicts that global growth in 2023 will reach 2,2%

Still weak but one percentage point above what was expected six months ago

The latest Economic Outlook released by Crédito y Caución shows an improvement in global forecasts that make stagflation of the global economy less likely.

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The credit insurer expects global growth in 2023 to reach 2,2%, a still weak rate but a percentage point higher than expected six months ago. Several factors have driven this evolution of its forecasts. The most relevant is China's turn, which has moved from zero tolerance policy to reopening, boosting its growth and that of the rest of the world by eliminate supply chain disruptions. Furthermore, both Europe and the United States have proven to be more resilient than expected to stagflationary pressures. In Europe, business flexibility has cushioned adjustments against the impact of energy prices and trade sanctions linked to the war in Ukraine. In United States, the labor market has kept unemployment below 4%, supporting the strength of consumption. 

 

However, the report points out that the prevalence of high inflation, especially underlying inflation, and a strict monetary policy keep the outlook for 2023 and 2024 under pressure. Although Crédito y Caución expects headline inflation to not return to normal until well into 2024, the aggressive rate hikes in 2022 and 2023 put us near the end of monetary tightening. 

 

In this context, business sentiment indicators in the services sector are improving strongly in all regions of the world. Those in the industrial sector have a less positive evolution, especially in the eurozone. Several factors explain this difference. Firstly, the post-pandemic recovery has been led by the recovery of services such as tourism or hospitality at the expense of goods. Secondly, the increased energy and financial costs They weigh more on manufacturing companies, which are more intensive in the use of energy and capital.

 

One of the most determining factors of future growth will be end of the war in Ukraine, still very uncertain

 

It is expected that tensions between Russia and the European Union, the United States and the United Kingdom remain beyond a possible ceasefire, which will sustain upward pressure on raw material and food prices. As for the pandemic, the World Health Organization has formally declared it over, removing supply chain strains and inflationary pressure on transportation. It is estimated that past restrictions and unprecedented fiscal stimuli generated excess savings in the range of 5,1% to 9,2% of GDP for the eurozone, the United States, the United Kingdom and Japan at the end of 2022. Until now, the North American consumer has been the most inclined to spend them. On the other hand, over the next few months we will move towards gradual fiscal consolidation to reduce the large public deficits, although it cannot be ruled out that advanced economies, especially, will continue to use fiscal policy to mitigate the impact of economic shocks.

 

The risk of deglobalization and even regional fragmentation has clearly increased. China does not distance itself from the Russian position in Ukraine, which has reinforced tension in its relationship with the United States. This puts pressure on supply chains and will gradually increase the cost of trade. However, the base scenario does not contemplate a decoupling of the main economic powers or an improvement in their current relationship. The tariff and non-tariff barriers that have been raised in recent years will remain in force.

 

Source: Credit and Surety