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.
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…
