From excessive pessimism to excessive optimism - Coface Barometer Q4 2022
The year 2023 starts with good news, at least on the macroeconomic front. Thanks to an autumn and early winter that were abnormal from a climatic point of view - which is the least good news - Europe has avoided a recession that looked long promised. Efficiency gains in all sectors and the slowdown in activity did the rest, allowing energy prices to fall sharply and thus leading to a welcome slowdown in inflation. The prospect of a strong rebound in China in the second half of the year, albeit very uncertain, also raises hopes that the global economy will get out of its current slump. This was enough for the financial markets to go wild, particularly in Europe: equities, bonds, credit, etc., all of which are now in the eyes of investors, who are rightly reassured by the fact that the worst-case scenario is now, for the time being, at bay.
While we fundamentally concur, we must be careful not to become complacent. The challenges facing the global economy last year remain relevant and the multidimensional crisis we are experiencing is not about to disappear: geopolitical fragmentation, the energy crisis, climate change, epidemic risks, etc. The transformation of the world is accelerating and generating risks, sometimes extreme, that are likely to derail the best-crafted scenarios and narratives.
In the short-term, the main risk lies in the continuity over time of the two main factors behind the current upswing in optimism. Given China's influence on commodity markets (oil and liquefied natural gas), reconciling the Chinese economic rebound with a concomitant, widespread and still immaculate fall in inflation seems relatively illusory. This is all the more true given that core inflation is decelerating only slightly or, in many countries, still rising. The expected pause at the turn of the summer in the monetary tightening process orchestrated by the main central banks could therefore only be ephemeral, as could the prevailing feeling of relief.
In this context, we have made few changes to our country (5 changes) and sector risk assessments (16 changes). In net terms, however, the trend remains towards downgrades.
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