The Times Australia
News From Asia

.

Coface Q3 2022 Barometer: ‘A Cold Chill on The Global Economy’

HONG KONG SAR - Media OutReach - 17 October 2022 - Beyond the repercussions of the war in Ukraine, the global monetary tightening and the multiple constraints on Chinese growth paint a gloomy outlook.

In the short term, the economy seems to be settling into a regime of "stagflation", where almost no growth and rapidly rising prices coexist. The possibility of a global recession, meanwhile, is becoming clearer.
In this context, Coface is making general downward revisions to its GDP growth forecasts and its country and sectoral assessments.
Eight countries, including Italy, Denmark, Switzerland, Egypt, and Chile, have had their assessment revised downwards after the 19 downgrades in the 2nd quarter.
The 49 downgrades of sectoral assessments highlight the clear deterioration of conditions in sectors sensitive to the economic cycle such as construction, metals and wood, in a variety of geographies.

Coface-EN.jpg

Winter and recession looming in Europe

Most of the risks mentioned in our previous publications have materialised: the energy crisis in Europe, persistent inflation, and aggressive monetary tightening. This has led Coface to revise down significantly its world growth forecasts for 2023: it should be below 2% as in 2001, 2008, 2009 and 2020.

While the growth forecasts have been revised downwards for all regions worldwide, Europe is the one whose outlook has darkened the most with a recession that seems inevitable in all the main economies this winter. Indeed, the energy crisis is intensifying and the old continent is preparing for "imposed" sobriety. Whether it takes the form of a "voluntary" reduction (suspension of activities that have become unprofitable because of energy costs) or rationing decreed by governments, the drop in energy consumption will necessarily translate into lower production and a decline in GDP. The extent of the decline will depend largely on the severity of the winter, and Germany, the continent's leading industrial power, will be at the forefront.

Consequently, the majority of our country risk assessment downgrades this quarter again concern European economies. Coface is proceeding with 6 additional downgrades, notably for 3 countries where the risk was still considered very low: Denmark, Switzerland and Luxembourg. Only Norway, a gas producer, remains in a position to enjoy the best risk assessment.

Faced with the prospect of persistently high global energy prices, almost half of the 49 downgrades of sectoral assessments concern energy-intensive industries such as chemicals, paper and metals. However, unlike the previous quarter, when most of these downgrades were in Europe, this time we also downgraded these sectors in most Asian economies and, for example, also in South Africa.

Central banks step up the fight against persistent inflation

Recent months have confirmed the materialisation of persistently high and increasingly widespread inflation in advanced and emerging economies.

In this environment, the main central banks remain resolutely aggressive and most of them have returned to key interest rate levels unseen in the last decade. The Fed, for example, raised its key rate 3 times in a row by 75 basis points this summer. This aggressiveness is leading to increased monetary tightening in other countries - particularly emerging countries - in order to halt the depreciation of their currencies against the USD.

Such a tightening of monetary and financial conditions, should it continue at the current pace, would obviously threaten global growth and financial stability.

Three emerging central banks are continuing to pursue counter-current monetary policies: Russia, Turkey and China. The Chinese monetary authorities have lowered some benchmark interest rates in order to support activity in response to the confirmation of a sharp slowdown in the economy. It continues to be affected by the zero-COVID strategy, the severe drought this summer and the crisis in the property sector. In particular, the woes of the property sector, which is estimated to account for 30% of GDP, will contribute to China's growth falling well below the standards of the last decades in 2022 (3.2%) and 2023 (4.0%), contributing to the sharp overall slowdown.

Widespread monetary tightening clearly darkens the outlook for the global construction sector. Industrial metals and timber prices have fallen steadily in recent months, and are down by 20% and 60% respectively since the beginning of the year, leading Coface to downgrade these sectors in several geographical areas.

Danger! Conflicting objectives between fiscal and monetary policies

While central banks are determined to fight inflation with "whatever it takes", many are faced with a conflict of objectives with the fiscal policy of their country/region. National governments, fighting against the contraction of activity, have indeed multiplied measures to support household purchasing power and corporate cash flow. The outcome will be a potentially explosive cocktail for public finances: a widening public deficit and soaring financing costs.

Click here to download the full barometer

Hashtag: #Coface

The issuer is solely responsible for the content of this announcement.

COFACE: FOR TRADE

With 75 years of experience and an extensive international network, Coface is a leader in trade credit insurance and adjacent specialty services, including Factoring, Debt Collection, Single Risk insurance, Bonding and Information services. Coface's experts work to the beat of the global economy, helping ~50,000 clients in 100 countries build successful, growing, and dynamic businesses across the world. Coface helps companies in their credit decisions. The Group's services and solutions strengthen their ability to sell by protecting them against the risks of non-payment in their domestic and export markets. In 2021, Coface employed ~4,538 people and registered a turnover of €1.57 billion.

For more information, visit

Times Magazine

DIY Is In: How Aussie Parents Are Redefining Birthday Parties

When planning his daughter’s birthday, Rich opted for a DIY approach, inspired by her love for drawing maps and giving clues. Their weekend tradition of hiding treats at home sparked the idea, and with a pirate ship playground already chosen as t...

When Touchscreens Turn Temperamental: What to Do Before You Panic

When your touchscreen starts acting up, ignoring taps, registering phantom touches, or freezing entirely, it can feel like your entire setup is falling apart. Before you rush to replace the device, it’s worth taking a deep breath and exploring what c...

Why Social Media Marketing Matters for Businesses in Australia

Today social media is a big part of daily life. All over Australia people use Facebook, Instagram, TikTok , LinkedIn and Twitter to stay connected, share updates and find new ideas. For businesses this means a great chance to reach new customers and...

Building an AI-First Culture in Your Company

AI isn't just something to think about anymore - it's becoming part of how we live and work, whether we like it or not. At the office, it definitely helps us move faster. But here's the thing: just using tools like ChatGPT or plugging AI into your wo...

Data Management Isn't Just About Tech—Here’s Why It’s a Human Problem Too

Photo by Kevin Kuby Manuel O. Diaz Jr.We live in a world drowning in data. Every click, swipe, medical scan, and financial transaction generates information, so much that managing it all has become one of the biggest challenges of our digital age. Bu...

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Times Features

What Makes Certain Rings or Earrings Timeless Versus Trendy?

Timeless rings and earrings are defined by designs that withstand the test of time, quality craftsmanship, and versatility. Trendy pieces, on the other hand, often stand testimony ...

Italian Street Kitchen: A Nation’s Favourite with Expansion News on Horizon

Successful chef brothers, Enrico and Giulio Marchese, weigh in on their day-to-day at Australian foodie favourite, Italian Street Kitchen - with plans for ‘ambitious expansion’ to ...

What to Expect During a Professional Termite Inspection

Keeping a home safe from termites isn't just about peace of mind—it’s a vital investment in the structure of your property. A professional termite inspection is your first line o...

Booty and the Beasts - The Podcast

Cult TV Show Back with Bite as a Riotous New Podcast  The show that scandalised, shocked and entertained audiences across the country, ‘Beauty and the Beast’, has returned in ...

A Guide to Determining the Right Time for a Switchboard Replacement

At the centre of every property’s electrical system is the switchboard – a component that doesn’t get much attention until problems arise. This essential unit directs electrici...

Après Skrew: Peanut Butter Whiskey Turns Australia’s Winter Parties Upside Down

This August, winter in Australia is about to get a lot nuttier. Skrewball Whiskey, the cult U.S. peanut butter whiskey that’s taken the world by storm, is bringing its bold brand o...