Business Daily Media

Men's Weekly

.

Coface Barometer Q2 2022: A recession to avoid stagflation - The world economy at a crossroads

HONG KONG SAR - Media OutReach - 22 June 2022 - Four months after the start of hostilities in Ukraine, first lessons can be drawn: the conflict, which is set to last, has already upset the global geo-economic balance.

In the short term, the war is exacerbating tensions in a production system that has already been damaged by two years of pandemic and is heightening the risk of a hard landing for the world economy: while the latter seemed to be facing the threat of stagflation a few weeks ago, the change in tone of the central banks, faced with the acceleration of inflation, has resurrected the prospect of a recession, particularly in the advanced economies.


In this complex environment, Coface revised downwards the evaluation of 19 countries, including 16 in Europe - Germany, Spain, France and the United Kingdom in particular - and made only 2 revisions upwards (Brazil and Angola). At the sectoral level, the number of downward revisions (76 in total, as opposed to 9 upward revisions) highlights the spread of these successive shocks across all sectors, both energy-intensive ones (petrochemicals, metallurgy, paper, etc.) and those that are more directly linked to the credit cycle (construction).

As the horizon continues to darken, the risks are naturally bearish and no scenario can be ruled out.

The slowdown in activity and the risk of stagflation are becoming clearer

Q1 growth figures were below expectations in most developed economies. In addition, GDP in the eurozone grew only very weakly for the 2nd consecutive quarter, with even a decline of -0.2% in France. This was due to a drop in household consumption against a backdrop of declining purchasing power. Activity also declined in the United States, hampered by foreign trade and the difficulties experienced by the manufacturing sector in replenishing its inventories. These figures are all the more worrying as the economic consequences of the war in Ukraine were just starting to bite.

Considering the acceleration in inflation, the deterioration in agents' expectations, and the tightening of global financial conditions, activity in Q2 does not look much better in the advanced economies, and considerably less favourable in the emerging economies. While it is probably too early to say that the global economy has entered a stagflationary regime, the signals are consistent with this view.

Commodity price pressures are settling in

Although commodity prices have stabilised recently, they remain at very high levels. For example, oil prices have not fallen below USD 98 since the beginning of the war, as fears of a potential supply shortage have remained significant.

This context is favourable to commodity exporters, and more particularly of oil. Coface's only two upward revaluations concern Brazil and Angola, and the sectoral reclassifications mainly concern the energy sector of producing countries, whereas the sectoral downgrades target the energy sector in countries where companies are located downstream in the production chain (mainly in Europe).

Similarly, industries whose value chain are energy-intensive in their production processes, such as paper, chemicals and metals, have their risks reassessed upwards. Agri-food is one of the sector with the highest number of downgrades this quarter, with almost all regions affected.

Finally, it is likely that companies that had not fully passed on the increase in their production costs to their sales prices will continue to do so. Thus, price increases will continue in sectors with significant pricing power. This is the case for the pharmaceutical sector, where a small number of companies dominate the global market. Already identified as one of the most resilient, it is the only sector with 'low risk' ratings in our barometer.

Central banks with both feet on the brake

The ECB has gradually tightened its stance, following the example of the Fed and the Bank of England, to the point of pre-announcing its future rate hikes. Like the other major central banks (except the Bank of Japan), the ECB has no other choice, within the strict framework of its mandate, but to tighten its guard significantly, despite the fact that this could trigger a brutal slowdown in activity and rekindle fears of a fresh European sovereign debts crisis.

In this environment of tightening credit conditions, the construction sector appears to be as one of the most vulnerable. Rising borrowing costs are expected to affect the housing market and, ultimately, construction activity. This is has started in the US where housing sales are declining rapidly.

The clouds are gathering for 2023

With the economic and financial environment deteriorating rapidly, Coface has downgraded the rating of 16 countries on the European continent, including all the major economies – with the exception of Italy, already rated A4.

Our central scenario suggests a significant slowdown in activity over the next 18 months, allowing inflation to decelerate gradually. Our growth forecasts are particularly poor in the advanced countries. There are many downside risks to the global economy, while the upside risk to inflation remains. To curb inflation, central banks seem tempted to push the economy into a recession, which they hope will be milder than if prices continue to slide, forcing them to implement a more violent monetary shock later. The risk, which cannot be ruled out, would be that demand would fall and inflation would remain high, due to commodity prices that would struggle to ease due to a chronic supply shortage.

Find here the new quarterly barometer produced by Coface.

COFACE: FOR TRADE

With over 75 years of experience and the most extensive international network, Coface is a leader in trade credit insurance and adjacent specialty services, including Factoring, Single Risk insurance, Bonding, and Information Services. Coface's experts work to the beat of the global economy, helping ~50,000 clients in 100 countries build successful, growing, and dynamic businesses. With Coface's insight and advice, these companies can make informed decisions. The Group' solutions strengthen their ability to sell by providing them with reliable information on their commercial partners and protecting them against non-payment risks, both domestically and for export. In 2021, Coface employed ~4,538 people and registered a turnover of €1.57 billion.

Linkedin :
Twitter :

#Coface

The issuer is solely responsible for the content of this announcement.

News from Asia

FGA Trust Showcases Hong Kong’s Institutional Strength at 2025 Inclusion Conference on the Bund

HONG KONG SAR - Media OutReach Newswire - 12 September 2025 - FGA Trust, a licensed trustee in Hong Kong, participated in the 2025 Inclusion Conference on the Bund by the invitation of InvestHK, a...

Appier Drives GenAI-Powered Creatives Transformation with AdCreative.ai, Empowering Hong Kong Brands to Accelerate into the Agentic AI Marketing Era

HONG KONG SAR - Media OutReach Newswire - 12 September 2025 - Appier (TSE: 4180), an AI-native SaaS company specializing in AdTech and MarTech solutions, today hosted the GenAI for Marketing Asia ...

Uni-Bio Science Group and Kexing Biopharm Forge Strategic Partnership to Accelerate Global Expansion of Osteoporosis Treatment Bogutai®

Zhangqiu District, Jinan City, Shandong Province – September 2025HONG KONG SAR - EQS Newswire – 12 September 2025 - Uni-Bio Science Group ("the Group") is pleased to announce the signing of a strat...

10th Belt & Road Summit celebrates decade of business, investment and co-operation achievements

HONG KONG SAR - Media OutReach Newswire - 12 September 2025 - The 10th edition of the Belt and Road Summit in Hong Kong (September 10-11) gathered about 6 200 high-profile participants from govern...

Digital Entertainment Leadership Forum 2025 Kicks Off Today

AI-Driven Innovation Unlocks the Missing Piece in Digital EntertainmentHONG KONG SAR - Media OutReach Newswire - 12 September 2025 - The Digital Entertainment Leadership Forum 2025 (DELF 2025), Cy...

COOFANDY, EKOUAER, and Zeagoo Announce Participation in Oktoberfest 2025 with Joint Pop-Up Event at Substanz Club

MUNICH, GERMANY - Media OutReach Newswire - 13 September 2025 - COOFANDY, EKOUAER, and Zeagoo are excited to announce their participation in the 2025 Munich Oktoberfest, alongside a special off...

Coastline Wealth Management’s Garrett Taylor Named a Top New York Best-in-State Wealth Advisor

LONG ISLAND, US - Media OutReach Newswire - 13 September 2025 - Garrett Taylor, CRPC®, Founder and Managing Partner of Coastline Wealth Management, has earned a place on Forbes' 2025 Best-in-State...

China Telecom Global Showcases at the 10th Belt and Road Summit, Paving the Way for a Smarter Silk Road Future

HONG KONG SAR - Media OutReach Newswire - 13 September 2025 - The 10th Belt and Road Summit was successfully held at the Hong Kong Convention and Exhibition Centre from September 10 to 11, 2025...

IVD Medical Holding Limited and ETHK Group Establish Joint Venture, On-Chain Financial Strategy Upgraded On September 14

NEW YORK, US - Media OutReach Newswire - 14 September 2025 - IVD Medical Holding Limited (01931.HK) released an announcement stating its collaboration with ETHK Group, a global on-chain financial ...

IVD Medical Holding Limited Releases "ETHK" Ecosystem Vision: Technology for the Public, Chain for the Way On September 14

NEW YORK, US - Media OutReach Newswire - 14 September 2025 - IVD Medical Holding Limited (01931.HK) officially announced its name change. Its English name was changed to "ETHK Labs Inc...

Manny Shah: Is your business disappearing from Google? You’re not alone

Small business owners across Australia are panicking as their websites vanish from Google’s front pages overnight. According to Manny Shah, cofounde...

MR Roads named Queensland Finalist in the 2025 Telstra Best of Business Awards

MR Roads, co-founded by Daniel Mikus and James Rolph, has been announced as a Queensland finalist in the prestigious 2025 Telstra Best of Business...

AWS research shows strong AI adoption momentum in Australia, with startups outpacing large enterprises in innovation

Amazon Web Services (AWS), an Amazon.com company, released new research revealing that while artificial intelligence (AI) adoption continues to acce...

Changing the World One Bite At a Time: IKU Turns 40

One of Australia’s first plant-based, chef-led eateries and now ready meal provider IKU is celebrating its 40 year anniversary with the business e...

Three generations marking 45 years in hot-air balloons

Australia’s leading hot-air balloon company is celebrating 45 years in the sky and its 700,000th passenger, driven by the passion of father-son du...

Workplace DMs, Reinvented: Deputy Messaging, Purpose-Built For Shift-Based Teams

Deputy, the global people platform for shift-based businesses, has launched Deputy Messaging, a fully integrated, real-time communication tool designe...

Sell by LayBy