The past year, 2023, was not the ‘annus horribilis’ that we all feared. Fortunately, the risks, primarily regarding energy supply, did not materialize – at least not in Europe. Likewise, we can welcome the year ahead more calmly. The hope for a ‘soft landing’ of the global economy still exists, while financial collapse and ‘hard landing’ are ruled out. This is stated in the latest risk assessment handbook by economists from the global company Coface, which deals with risk management. The handbook provides analyses and forecasts for 160 countries and 13 sectors of activity.
Global slowdown
As explained in the introduction by Xavier Durand, CEO of Coface, the global economy is expected to grow by about 2.5 percent, despite last year’s challenges such as the banking crisis in the US, conflicts in the Middle East, the weakening of the Chinese economy, and the turbulent monetary and financial environment in the US and Europe. Thanks to the resilience of corporate balance sheets, 2023 achieved a better result than expected. However, the latest figures show that savings and cash flows are significantly decreasing, while corporate insolvencies are on the rise. For the current year, Durand believes that the only certainty is that we will not lack surprises in the economic field.
– Recent events have shown us that history is accelerating, and it would be strange if 2024 were an exception. Especially since the year will be particularly demanding due to parliamentary and/or presidential elections in 70 countries that make up more than half of the world’s population and GDP. From Taiwan a few weeks ago to the US in November, voters will be called to the polls in India, Pakistan, South Africa, and Iran… Not to mention the European elections that will take place this spring, in the context of heightened social tensions and the rise of populism of all kinds – said Durand, who expects a slowdown in the global economy, primarily due to the slowdown in growth of developed economies such as the US and China.
– Europe, for its part, should slightly accelerate under the influence of the expected recovery of the German economy, although growth on the Old Continent will remain below potential – +0.9 percent. Finally, the weakening of the dollar and interest rates should provide some breathing space for emerging economies facing constraints in accessing external (re)financing – believes Durand.
Thus, the main source of instability in most developed countries will be the conflict between restrictive monetary policies on one side and expansive fiscal policies on the other. The rise in service prices, still ranging from 4 to 5 percent compared to the previous year, shows that the battle with inflation is largely ongoing, but has not yet been won.
Sectors of Central and Eastern Europe under pressure
Every quarter, Coface reviews 13 sectors in 28 countries (which represent approximately 83 percent of global GDP) in six major regions of the world. To assess the credit risks of countries and sectors, Coface uses data on corporate payments worldwide, processes financial data, and analyzes risks associated with structural changes that may occur in a sector or country.
Regarding risks among economic sectors, in Central and Eastern Europe, the highest risks are in construction, the textile industry, transport, and the wood industry. There is also a high risk in the chemical, metal, and paper industries, as well as in energy, while agriculture, food, and automotive industries, ICT, and retail have medium risk. Only the pharmaceutical sector has a low risk of economic shocks.
