The start of 2023 had good news, but hints of a less promising end emerged. Inflation, economic slowdown, and geopolitical changes create uncertainty.
Macroeconomic Challenges Ahead
The start of 2023 brought some good news, but the outlook for the rest of the year is less promising. Inflation remains a concern, with central banks struggling to meet their targets. Additionally, the recent attacks in Israel have disrupted the oil market, further adding to the volatility. Leading indicators suggest a slowdown in North America and the Eurozone towards the end of the year, while China’s economy continues to face challenges and lack confidence among households and businesses. Despite some stability in expectations, the overall environment remains highly uncertain and volatile.
Towards a Multipolar World
Recent geopolitical events have further upset the global landscape. The expansion of the BRICS group to include six new members, which some believe will challenge the predominance of the G7, may not lead to a significant alternative vision. The objectives of BRICS+ are not aligned, and tensions between China and India limit their ability to compete with the G7. While the geopolitical order may be evolving, the impact of this shift remains limited in the short term.
Inflation and China’s Recovery
Inflation has continued to recede in recent months, but signs of its persistence remain. Core inflation has been slow to decline in advanced economies, and there are concerns about a resurgence of inflationary pressures towards the end of the year, especially with rising oil prices. China’s post-Covid recovery has been disappointing, with weak economic data for domestic demand and exports. Consumption has been cautious, and investment has been limited due to concerns in the real estate market.
In Western Europe, the energy sector is experiencing higher margins for hydrocarbon producers and refiners, leading to upgrades in the sector’s risk assessments. The agri-food sector in the region is also showing positive momentum. However, the paper sector has seen the highest number of downgrades. Overall, there are mounting social and political risks globally, with deteriorating living conditions contributing to growing frustration.
Source: Country and Sector Risk Barometer Q3 2023: Macroeconomics put to the test by microeconomic deterioration / News / News & Publications.