A cold chill on the global economy - Barometer Q3 2022
As autumn sets in across the northern hemisphere, the skies are darkening over the global economy. Beyond the repercussions of the war in Ukraine, which we highlighted in our last barometer, the global monetary tightening and the multiple constraints on Chinese growth paint a gloomy outlook, to say the least. 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. The general downward revisions to our GDP growth forecasts this quarter reflect this.
Our assessment changes are also consistent with this logic and with the numerous downgrades made last quarter. Coface has downgraded eight countries (Italy, Denmark, Switzerland, Cyprus, Luxembourg, Malta, Egypt and Chile), after 19 in the second quarter. The 49 sector risk assessment downgrades highlight the clear deterioration of conditions in sectors sensitive to the economic cycle (construction, metals and wood).
Over Europe, more than anywhere else, the clouds are particularly threatening. Following the complete shutdown of the Nord Stream gas pipeline at the beginning of September, the energy crisis triggered by the Russian invasion of Ukraine is intensifying. The Old Continent is therefore preparing for “imposed” sobriety, as the European Union has finally agreed on a plan to reduce gas consumption, while some industries have announced that they would reduce their production to cope with soaring energy costs. As the region prepares to wrap itself in its winter clothes, it seems inevitable that it will have to ration its energy consumption, especially of natural gas and electricity. Germany, the continent’s leading industrial power, will be at the forefront of this crisis (see our Germany Corporate Payment Survey 2022 for more information).