The global economic outlook for 2023-24 is weak, with an increase in corporate risk and insolvencies forecast, and the UK anticipated to experience the deepest recession amongst the large economies. Global growth is still expected to head towards a recession next year, with trade forecast to decline in 2023, before recovering in 2024.
These are among the forecasts from trade credit insurer Allianz Trade, which warns that slower growth, higher inflation, wage bills and interest rates have increased corporate risks, mainly in the construction, transportation, telecoms, machinery and equipment, retail, household equipment, electronics, automotive and textiles sectors. The energy crisis is also bringing about a considerable profitability shock for European firms.
“The climb in insolvencies is driven by a sharp increase in liquidations, suggesting that businesses which were struggling either before or during pandemic lockdowns have simply chosen to close rather than attempt to restructure or sell,” said Maxime Darmet, senior economist, France the US and UK, Allianz Trade.
Insolvency rates are still increasing in the hotels and restaurants sectors, while construction, training companies, transport and storage, and financial and real estate businesses have also been hit hard.
Supply chains should continue to normalise next year, supported by slowing demand and China’s progressive reopening, according to Allianz, which expects global trade in goods and services to grow by only +0.7% in volume terms in 2023 and to contract by -1.3% in value terms (to US$29.5tn). A mild recovery should be possible in 2024, with global trade in goods and services growing by +3.6% in volume terms.
“We believe global trade will continue to slow next year as industrial activity recedes,” Darmet added. “The manufacturing sector is likely to remain in recession in 2023 due to lower demand, mainly for consumer-driven industries, and a more pronounced destocking process from corporates in sectors where oversupply is highest. The largest cliff-edge is expected in cyclical sectors such as construction, consumer goods and retail.”
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