July 2023

It’s still about
inflation
Atradius Economic Outlook

Atradius Economic ResearchJohn Lorié, chief economist

Dana Bodnar, economist

Theo Smid, senior economist

john.lorie@atradius.com+31 (0)20 553 3079
dana.bodnar@atradius.com+31 (0)20 553 3165
theo.smid@atradius.com+31 (0)20 553 2169

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Executive summary
The global economy is performing better than we expected at the start of the year, which means that a'stagflation' scenario has been averted for now. The reopening of the Chinese economy after Covid alongwith resilience of the US and eurozone economies to high energy prices are bringing relief to global
growth in 2023. However, the full effect of monetary tightening on demand is still to be felt, keeping our2023 and 2024 outlook subdued. We consider a deepening of persistent inflation to be the main risk to
our outlook. The further central bank rate hikes that would be necessary in such a scenario, would pushGDP growth in the US and eurozone in or close to negative territory.

Key points


Global GDP growth is forecast to slow to 2.2% in 2023 from 3.1% in 2022. Despite the slowdown, the 2023 forecast issignificantly better than what we expected six months ago. There are two major reasons for this upgrade. First, thereopening of China after the sudden reversal of the zero-Covid policy that happened earlier this year. Second, the US andeurozone economy proved more resilient to ‘stagflation’ forces, such as the energy price shock and sanctions on traderelated to the war in Ukraine. For 2024, we foresee 2.1% growth globally. This is a subdued growth rate in historicalperspective, as the full effect of monetary policy tightening and sticky inflation are increasingly felt.

As energy prices decline, headline inflation has moved past its peak. In major economic regions such as the eurozone
and US, core inflation (inflation excluding energy and food) remains sticky however. Underlying this is the gradualnormalisation of demand after the pandemic. Demand switching back from goods to services such as travel, hospitality
and events is driving up price pressures in the services sector in particular. With monetary policy tightening gradually
taking effect, we expect inflation to come down significantly over the forecast period.



We forecast global trade growth to slow down to 1.9% in 2023, from 3.2% in 2022. The trade forecast for 2023 is better
than previously expected as GDP growth in the US and eurozone turns out more resilient and China’s reopening has abeneficial impact. For 2024 we predict a slight recovery of trade growth to 2.5%. Our forecast is in line with theprediction that the relationship between trade growth and GDP growth has settled down to 1:1.



We project GDP growth across advanced markets to reach 1.0% in 2023, better than the stagnation expected at the
beginning of the year due to consumer resilience. But as the effects of monetary tightening are increasingly felt, growthin 2024 remains very restrained at 0.9%.

GDP growth in emerging market economies (EMEs) is forecast to stay in lower gear at 3.9% this year and 3.8% in 2024.
Under the headline figure lies substantial heterogeneity. Emerging Asia is set to lead other regions again as China’s
economy rebounds from Covid lockdowns. Latin America, struggling with structural weaknesses and politicaluncertainty, will lag other regions.



In our baseline scenario, inflation is expected to come down as monetary tightening has its effect on demand,
compounded by stricter lending conditions. There is, however, the ongoing risk that inflation persists. If such a scenario
plays out, central banks will have no choice but to hike rates further. This is then likely to push GDP growth in the US
and eurozone in or close to negative territory.

1. The global macroeconomic environment
Weak, but not that bad
In our December 2022 Economic Outlook we made a case fora period of mild stagflation - economic stagnation in
combination with high inflation. This was reflected in thetitle of the document: ‘Stagflation light’. Six months on, it
turns out that economic development is indeed weak, but notnearly as bad as feared back then. This improvement
highlights the high level of uncertainty surrounding the
global economy.
It is not that we had no good reasons to forecast a negative
growth environment for the US and Europe, and very weakeconomic development for other parts of the world,
including power house Emerging Asia. We had three, solidlooking reasons. First, inflation. This resulted from supply
and demand imbalances inherited from the Covid-19
pandemic, leading to value chain bottlenecks andskyrocketing transport costs. It was subsequently
aggravated by the war in Ukraine that induced commodity
price rises. Inflation is supposed to put a brake on demand,
especially household consumption, and thus restrain GDP
growth. Second, monetary tightening by central banks. In
order to fight inflation, these institutions, notably the US
Federal Reserve (Fed) and by the European Central Bank
(ECB), started hiking interest rates, stopped purchasing
bonds, and later on even started selling bonds. Higher
interest rates that come with this drive up financing costs
and in that way restrain demand, more specificallyinvestments by firms. Again, it puts a brake on GDP growth.
Third, growth in China, the world’s second largest economy,
was held back. Zero tolerance Covid-19 policy, leading totesting, quarantining and lockdowns dominated the country
even in late 2022. This, in combination with an evolving
property crisis, had a negative effect on production as well as
consumption, and thus on GDP growth.
So what changed to drive the improved outlook? Most
prominently, of course, the reopening of China after thesudden reversal of the zero tolerance policy since December
2022. It is boosting Chinese consumption as well as
production in 2023, positively affecting growth in China
itself, but also in the rest of the world. Chinese supply chain
disruptions are removed and import demand from thecountry will rise. This underlying stagflation force wastherefore largely eliminated.
The other pleasant surprise came from Europe and the US,
which have proven more resilient than expected to1

Energy price rises were at the heart of the surge in inflation during2022. Had they remained constant, this would have had adownward effect on inflation; inflation is no more than a

1 | Atradius Economic Outlook – July 2023

stagflation pressures. Economic activity in Europe has
weathered the energy price shock and sanctions on traderelated to the war in Ukraine relatively well so far.
Governments put in large sums, to the order of 1.3% of GDP in
the EU, to shield households and firms from the rise inenergy prices. Helped by a relatively mild winter, energy
consumption savings by households were higher than
expected. Firms proved rather flexible in adjustingprocesses. This, in turn, dampened and later supported thedecline in energy prices. The result was that consumption
and investment held up better than expected. Finally, in the
US monetary tightening did not bite as hard as initiallyenvisaged. The US labour market remained very tight with
unemployment below 4%. Not worried by unemployment
and with large accumulated savings during the pandemic,
the US consumer has kept up consumption. This was astronger than expected impetus from GDP growth.
Here the positive news stops. The other two, strongly related
and powerful, stagflation forces still linger. Inflation iscoming down relatively quickly, helped by positive baseeffects and declining commodity prices.1 But not as fast as
hoped. Especially core inflation, that is inflation excluding
the volatile food and energy price components, is proving
stickier than expected. This as such is also not surprising,
given the energy crisis resilience in Europe and ongoing
spending by the US consumer. In reaction to this, monetary
tightening has arguably been more aggressive than initially
expected. That such tightening has side-effects became clear
in early March, when the failure of Silicon Valley Bank (SVB)
in the US sent a shockwave through global financial markets.
The impact of this has so far been contained, but will clearlybolster the effect of tightening on demand as we will
elaborate below. While China’s reopening and consumer
resilience in advanced markets improves growth prospects,
the prevalence of elevated inflation and tight monetary
policy keep the 2023-2024 outlook weak.

Moving away from stagflation
A more resilient Europe, a stronger-than-expected US
economy and a reopening China imply that the impact ofstagflation forces are less keenly felt in 2023. Indeed, thepreviously forecast neutral or negative growth in 2023,

comparison between the price levels in two years. This effect isreinforced if, as happened, the energy prices decline.

especially in the US and Europe, is no longer on the cards.
Sentiment indicators concur with this view.
The negative trend in consumer confidence, still clearlyvisible in late 2023, has reversed. Yet all major global
economies, the US, the eurozone and China remain in
negative territory (below 100). This indicates that consumers
will remain careful with spending decisions. For the US andthe eurozone this is not surprising, given that inflation is still
significantly above levels that consumers have been used toover the past decade. So is monetary tightening, that feeds
back into consumer spending, directly via interest rate costs
for borrowers, and indirectly via wealth effects forhomeowners as well as asset portfolio holders. For China, theimpact of abandoning the ‘zero Covid’ policy is a major factor
for what now seems a recovery in consumer sentiment.
However, the level of consumer confidence is still pointing at
cautious consumer spending. Overall, a picture in line with abetter but still weak GDP growth for the short term, in 2023.
Figure 1.1 Consumer confidence on the way up

Several factors come into play that explain the difference inservices and manufacturing PMIs. First, the recovery fromthe pandemic was led by services. This is the switch backfrom goods to services that we alluded to in previous
Outlooks. For services, such as tourism, hospitality and thelike, the pandemic had put a brake on demand. That was
expected to be compensated for after the easing of pandemic
restraints, to some extent at the expense of goods. Second,monetary tightening and the resulting increase in financing
costs weighs heavier on manufacturing firms. These simply
need more financing than firms in the services sector. Third,
energy costs also weigh more heavily on manufacturing.
This means that, though the energy crisis is fading, theremaining high energy costs weigh more on the
manufacturing sector.
The analysis of the previous section as well as thedevelopment of the sentiment indicators all point to stronger
growth in 2023. That is reflected in our baseline forecast
which has been revised upward by 1.0 percentage point (ppt)
globally. All regions contribute, with an above-averagerevision for the US by 1.7 ppt. Emerging Asia growth was
upwardly revised by no less than 1.6 ppt, with the China
reopening clearly playing a large role (1.3 ppt upwardrevision). Even Eastern Europe, including war-stricken
Russia and vulnerable Turkey, faces an uplift For 2024 thepicture, with the exception of Emerging Asia, points in thereverse direction. This should not come as a surprise. In the
December forecast, 2024 was seen as a year of recovery. Ourlatest forecast foresees a better 2023, but a worse 2024
compared to six months ago. Moreover, the full impact ofmonetary tightening, which works with lags on demand, andstickier inflation is still to be felt.

Business sentiment indicators even go one step further.
Purchasing managers’ indices (PMIs) are not only improving
in the US, the eurozone and China, but are also in positive
territory. That is to say: all above 50, a level signalling
growth in the order portfolio and thus GDP. It should behighlighted that this growth is determined by the services
PMI, which is improving and robustly in positive territory, inall regions. Manufacturing PMIs are indeed painting a far
less positive picture, with that of the eurozone still below 50
and those for the US and China only marginally above thatbenchmark.

Global growth in 2023 is now forecast to be 2.2%, which isindeed weak, an improvement compared to what we
expected six months ago. This conclusion can also be drawn
for the US and the eurozone as well as Latin America andEastern Europe. With 5.3% growth, Emerging Asia is again
the global carthorse. For 2024 this growth pattern does notfundamentally change for the eurozone, Emerging Asia andLatin America. Significantly higher growth is expectedthough for Eastern Europe, driven by a recovery from a 2023
slump in Russia and Turkey. The resulting global growth,
however, is a slight fall to 2023 at 2.1%.

Figure 1.2 Business confidence in positive territory

Table 1.1 Real GDP growth (%) – global regions
2021

2022

2023f

Eurozone

5.3

3.5

0.6

2024f
1.2

United States

5.9

2.1

1.3

0.4

Emerging Asia

7.8

3.8

5.3

4.9

Latin America

6.9

3.6

1.3

1.0

Eastern Europe

7.0

1.8

1.4

2.2

World

6.2

3.1

2.2

2.1

Sources: Oxford Economics, Atradius

Atradius Economic Outlook – July 2023 | 2

Figure 1.3 Significant improvement in forecasts for 2023

Baseline assumptions fairly
stableOur forecast which we further develop in this chapter andbeyond comes with a number of assumptions. While we havewritten them now somewhat more compactly, in essence
they have not changed since the December 2022 Economic
Outlook.
First, the timing of the end of the military conflict is highly
uncertain. Whenever that may happen, the tensions between
Russia and the western coalition led by the US, UK and EU
are expected to last well beyond a ceasefire or peace deal.
Therefore, the upward pressure of the war on commodityand food prices is expected to last and remain at the current
level. It means we expect no new spikes in energy or foodprices to arise. Gas rationing in Europe over the coming
winter is likely to be avoided. Sanctions remain in place overthe forecast horizon.
Second, the World Health Organisation (WHO) has formallydeclared the Covid-19 pandemic to have ended. China hasabandoned its ‘zero Covid’ policy. If this virus, or any other,flares up again we assume no return to lockdowns and if so,they may be temporary and with much less impact on theeconomy and society in general. Pandemic-related supply
chain tensions have abated, as has the exorbitant pressure
on transport, airborne and maritime, and the related
inflationary pressures, and will not return.
Third, supply restrictions during the pandemic and theunprecedented government support during the energy crisis
led to excess savings. Excess savings were in the range of
5.1% to 9.2% of GDP for the eurozone, US, UK and Japan by
the end of 2022.2 The US consumer has so far been mostprominent in spending these, with milder spending by UK
and Japanese consumers, and very limited by the eurozone
consumers. This pattern is expected to continue.
Fourth, the pandemic support programmes by governments
have all ended now. The expected reduction in government
deficits was slowed down by new support programmes
2
See Excess savings can still deliver an upside surprise. Researchbriefing. Global. Oxford Economics, May 10 2023.

3 | Atradius Economic Outlook – July 2023

intended to offset the rise in energy prices. As energy prices
have calmed down, we expect the programmes to be scaled
back now that their use is limited. That implies fiscal
consolidation is likely to occur, if only gradually. This is also
necessitated by the hikes in interest rates that will gradually
start weighing on government budgets. Governments,
especially in advanced economies, are nevertheless expected
to continue using fiscal policy to mitigate the impact of
economic shocks.
Fifth, inflation is expected to come down as the forecast
period progresses, with speed and pace varying per
economy. Our assumption is that no new shock to energy
prices will occur, meaning that source of inflation will dry
up. Inflation will be brought down by base effects. Anothersource of inflation, supply chain tensions, has also faded.
Tightening of monetary policy will ultimately weigh in too,
as will more fiscal policy restraint. The key assumption
though is that wages will not rise as much as prices, so that a
vicious wage-price spiral is avoided. To that end, anchoringof inflation expectations is key, and that is what we currently
see and expect to continue as well. We see no switch to apermanently higher rate of inflation.
Sixth, whereas the forces that bring inflation down arestrong, the process is delayed by more resilient economic
growth. As a result, headline inflation is not expected to fallback to target until well into 2024 and perhaps later. But
given the aggressive rate hikes in 2022 and 2023 so far, we
think the end of monetary tightening is nearing. The
tightening impact of turmoil in the US banking sector in theearly spring has reinforced this point. Interest rate cuts
cannot be expected this year in the major advanced
economies, barring more weakness in the economy. Gradualbalance sheet reduction of central banks, throughredemption of bonds purchased during the crisis, willcontinue.
Seventh, the risk of deglobalisation and even regional
fragmentation has clearly grown. China is not distancing
itself from the Russian stance in Ukraine, which has
reinforced the stress in its relationship with the US. The EU
has awoken to a new reality. This puts pressure on existing
supply chains that have just recovered from the pandemic
and will increase the cost of trade, if only gradually. Still no
decoupling is on the cards in our baseline in the relationshipbetween the major economic powers. Neither is there any
meaningful thawing in the relationship between the US andChina. Tariffs and non-tariff barriers that have been erected
over the recent years remain in place.
Eighth and last, ‘scarring’, meaning damage to the skill set ofworkers and productive capacity of capital owing to thepandemic has remained limited. Likewise its impact on
productivity and potential GDP. This is due to theunprecedented government support during the pandemic.
Meanwhile new technologies such as artificial intelligencecreate upward potential to productivity.

Trade growth slowdown lesssevereTrade growth amounted to 3.2% for the full year in 2022,
marking a significant decline in the growth path during thesecond half of the year. That was expected as the first half of2022 contained lagged effects of the past pandemic trade
recovery in 2021 (10.4% growth). The decline was expected tocontinue into 2023 given the weak economic environment.
That weakness now turns out to be less severe. This isreflected in an upgrade, albeit limited, of our global trade
growth forecast to 1.9% (from 1.5%) for 2023 and 2.5% for2024.3 This is confirmed by forward-looking indicators suchas the global new export orders index (Figure 1.4). This has
markedly improved, suggesting stronger growth over thesummer and into the autumn. With this forecast, we stay inline with what we believe the relationship between trade
growth and GDP growth has settled down to: 1:1.4 Therefore,
the trade slowdown is less severe than previously expected.
Figure 1.4 Export orders signal trade growth improvement

Let us look a little more closely at the drivers of our trade
growth upgrade. The good news is, most obviously, thatimport demand will benefit from the better-than-expected
GDP growth. As we saw, the US and eurozone look to befending off negative growth in the full-year 2023. The
reopening of China will also have a beneficial impact onimport demand. Moreover, China’s reopening has anotherbeneficial impact on trade. During the period of zerotolerance and accompanying lockdowns, trade was diverted
to other countries, notably in Southeast Asia. To the extent
that this was driven by the zero tolerance policy, this trade
diversion is temporary and more costly. That trade can now
be recaptured by China, indeed lowering trade costs. This hasa beneficial impact on trade growth. Finally, supply chain
constraints have fallen significantly, also pointing to lower
trade costs. The global supply chain pressure index (Figure1.5) is now even below pre-pandemic levels.

3
4

We focus on trade in goods volumes.

See for this WTO Global Trade Outlook and statistics, April 2023,
Chart 1. That picture also highlights that trade growth is also

Figure 1.5 Supply chain pressures below pre-pandemic levels

Other factors remain a drag on trade growth. First, higher
financing costs as a result of monetary tightening have anegative impact on trade. Especially capital goods trade,
requiring more finance, is affected. US, German andJapanese capital goods exports were down by around 2.5% yo-y in the early months of 2023. Second, foreign direct
investment flows are under pressure. The IMF signalled adecline from 4% to 1.7% of GDP since 2018. Whereas this also
reflects the impact of tax driven moves by multinationalfirms and flagging mergers and acquisitions, the underlying
trend in greenfield foreign direct investment is also negative.
Third, GDP growth is largely determined by services growth,with manufacturing remaining weak as we saw above. This
was largely expected during the post pandemic recovery,
with demand swinging back to services. The trend iscompounded by the energy price rises that hamper
production in countries like Germany. Energy savings havesupported mitigation of the impact, as have lower energy
prices. But it is mitigation, not elimination of the impact.
Goods production, including intermediary goods andtherefore trade in goods, remains supply side constrained.
Fourth, the EU and Russia trade collapse continued. Whereas
exports of goods to Russia from the EU are now fairly stable
at 50% of the pre-war level, the full effect of the ban on crude
oil and petroleum products is still to be felt. Natural gas isunsanctioned but Russia minimised gas flows in 2022, now
accounting for only 10% of the EU gas imports (previously
this was around 40%). Pipeline flows are only 10% of theprevious flows,5 the rest comes from LNG imports. Trade lost
between Russia and Europe will be diverted, but it will taketime and comes at a higher cost: trade therefore becoming
less efficient. For now, Russia is delivering oil to China andIndia. Fifth, whereas no signs of decoupling from China
exist, a more cautious attitude does. This is reflected in trade
figures, especially those between the US and China. US
imports coming from China fell in the final quarter of 2022
to 13.9% of total imports, from 21% in 2018 before the Trump
tariffs were imposed. In particular, electronic equipment
slumped (40% to 27% of imports) as well as electronics andcomputers (50% to 30%). For now, China has maintained its

moving mildly above GDP growth. In a downturn, trade growth isbelow GDP growth and vice versa.
5

Notably through Ukraine.
Atradius Economic Outlook – July 2023 | 4

share in Europe’s imports. But upcoming restrictions on techexports by countries such as the Netherlands signal pressure
on trade.
Looking at various sectors, we see effects of unwinding of
the pandemic and thus the switch from goods to services
demand. This shows a success story in services, especially in
travel and transport. These were precisely the sectors thatwere hit hard by the pandemic. Now, countries such as theUK, France, Spain and Italy have recovered their lost ground.
The US, Japan, Australia and Thailand have not. It is herethat the restrictions in China are still felt, but this will change
now that China is reopening. Lingering effects of thepandemic will fade, thus creating upward trade potential inautomobiles (8% below pre-pandemic), aerospace products(40% below) and tourism as they return to normal. Semiconductors, however, flourished during the pandemic asconsumer demand for electronics soared. This trend is now
being reversed: demand in 2022 was 25% lower than in 2021
and back to the 2019 level. Advanced economies in Asia withstakes in these sectors, such as South Korea and Taiwan are
bearing the brunt. Chinese semi-conductor exports also fell
back, partly reflecting its zero tolerance policy. Overall, thesectoral winners of the pandemic are now losing, and viceversa.
Zooming in on regions, we see most regions recording trade
growth to the tune of 5% in 2022.The major exceptions,dragging down the overall figure, are China (-2.5%) andEastern Europe (-19%), which includes Russia (Figure 1.6).
With the above sketch of developments of the factors
underlying trade growth, this does not come as a surprise.
Figure 1.6 Trade growth continues to decelerate

Fossil fuel price slide halts
Energy prices have slid further. The oil price is a case inpoint. Since the June 2022 peak of USD 130 per barrel Brent
after the shock of the Russian war it has embarked on a
downward trajectory. It has now somewhat calmed down,hovering between USD 70 and USD 90. Russian oil kept
flowing to the markets. A better than expected global

6

OPEC+ includes Russia.

7

These include a ban on insurance of ships carrying oil at purchaseprices above USD 60.

5 | Atradius Economic Outlook – July 2023

economy, the reopening of China and the OPEC+ production
constraints provided price support.6 Gas prices, more
precisely European gas prices, peaked in September 2022 atunprecedented levels amid fear of shortages after Russia cut
its pipeline supplies to Europe. As European households andfirms quickly adjusted, helped by a mild winter, prices
started to come down rapidly. The same pattern, though far
less pronounced, can be seen in US and Asian markets. The
rapid decline of gas prices has outpaced those of coal, so thatthe latter has lost its competitive advantage as an input inthe power sector.
This pattern of lowering prices is not expected to last. We
think oil prices will remain within the current range as theforces on the supply side roughly balance. This issignificantly higher than prior to the Russian war. A further
gas price slide is also not on the cards. It has a bottom
determined by the liquefied natural gas (LNG) price, which isa factor 2-3 higher compared to pipeline gas. Coal prices are
expected to decline but remain higher than before thepandemic as well, helped by reduced demand and higher
carbon prices. In short, fossil fuel prices are mostly expected
to move sideward during the forecast period. Levels willremain higher than pre-war. Let us look in more detail atthese markets now.
Oil. Various factors have determined the oil price movementsin the said range during the first months of 2023. On the
supply side, after the USD 60 price cap in December for crude
oil sales to sanctioning countries last year, the G7 imposed a
price cap on oil product exports of USD 100 and the EU an
embargo and Maritime Services Ban,7 both in February. The
idea is to reduce crude oil and crude oil products revenue for
Russia, while limiting the disruption to the market. So far it
has worked out well, in a sense. Russia is selling its oil at a
discount at an estimated value of USD 10-15 below the pricecap, indeed restraining the revenues. Oil has also kept
flowing to the market. Not to the sanctioning countries
though, but rather to Asian markets, such as India and China.
The maritime services ban is reportedly being circumvented
by a ‘shadow fleet’ of aged oil tankers operating outside
usual maritime channels. This comes at the cost of longer
journeys and risk of spills. Meanwhile, other OPEC +countries’ oil supply rose by 3 million barrels per day in2022. But this is below the announced production targets. In
the first part of 2023 that shortfall was about 2 million
barrels per day (mb/d), especially in Angola and Nigeria.
With this in mind, the announcement in April by OPEC+ to
cut production by another 1.7 mb/d until end-2023(including a Russian cut of 0.5 mb/d) came as a surprise.
8
Surprise it may be, it does provide support to the oil price.
Meanwhile, US oil production, accounting for about 10% of
global production, was slightly higher in the first months of2023, but its upward potential is limited. The number ofdrilled but uncompleted wells is now lower than before and

8

In June, Saudi Arabia added a voluntary reduction of 0.5 mb/d,while OPEC+ agreed to extend the production reduction into 2024.

there are labour shortages as well as high wage and other
input costs.

longer term remaining oil demand. So far, there have only
been muted signs of increased investment.

Figure 1.7 Oil price slides

Gas. As global gas prices came down, large price gaps
emerged between the three global markets. European and US
prices plunged more than 50 % in Q1 2023 (versus Q4 2022),
the Asian benchmark by almost 10%. As a result, the latter
ended up twice above its pre-pandemic average, theEuropean benchmark by a factor 1.3 above, but the US one
was 16% below it. This narrowed the unusual price gap
between the European and Asian benchmark existent since2021. In particular, increased LNG trade to Europe supported
this.
Figure 1.8 Global gas prices converge again

Moving to the demand side, while monetary tightening
continued to rise, the economy weakened, albeit less than
expected. This had an impact on oil demand, especially in the
US and Europe. Q4 2022 oil demand in Europe was 0.7 mb/dlower y-o-y, especially from the manufacturing sector.
Nevertheless, better-than-expected demand developments
support the oil price. China plays an important role in this. It
fell by 3% in 2022, and even 31% for aircraft fuels y-o-y in Q4
2022. China’s reopening has led to expectations of rapid
growth of demand for oil. The country is the second largest
oil consumer after the US. In the meantime, as during the lastmonths of 2022, demand exceeded supply and inventories
were drawn on. This has now halted. In January commercial
inventories rose to their highest level since September 2021,
reducing that source of price volatility. Still, government
stockpiles that were drawn on after the early phase of theRussian invasion have yet to be replenished. This process
may take years.
Our forecast of an oil price moving sideways, whileremaining volatile, is supported by an expected oil
consumption rise of 2% to about 102 mb/d in 2023, which is a
new all-time high. Demand is expected to peak in 2024, after
which the energy transition will weigh in more heavily. Thisis supported by the expected recovery in China, covering
about half of the expected demand rise. Other Asian
countries will account for most of the rest of the surge. In therest of the world, weak industrial activity and ongoingtransition to a low carbon-emission economy will bereflected in sluggish demand growth. It is particularly the
resurgence of travel and travel related activities that willcontribute significantly to global demand growth. Production
is anticipated to show a slightly smaller increase, to 101
mb/d, also an all-time high. The production expansion will
mainly come from the US (adding 1 mb/d), Brazil, Guyana
and Norway. OPEC + supply will remain flat, implying a mild
decline compared to 2022. Russia’s production is expected to
decline by 0.4 to 0.8 mb/d. The now anticipated supply
shortfall for 2023, and potentially 2024, will obviously haveto be met, by drawing on inventories, or indeed, lower
demand in combination with more supply. As we havementioned in previous Outlooks, a major risk is a shortfall ofinvestment, especially in upstream activity, to cover the

Global gas demand fell 2% in 2022. Particularly in Europe
demand was lower, caused by high prices, a mild winter andgovernment policies to save energy. European demand fell
8% in 2022 as compared to the pre-pandemic average.
Demand from the power sector held up though as gas filled
the shortfalls from hydropower and nuclear in Southern
Europe. Asian demand was somewhat reduced as a result ofhigh prices, mild weather and the impact of Covid-19,
especially in China. Apart from reduced economic activity, it
was also other energy supply (coal) that contributed to lower
gas demand. LNG exports to China were 75% lower. The
exception in this regional picture is North America, where
consumption rose by 5%. Power generation in both the US
and Canada contributed, as did residential demand in the US
and industrial demand in Canada.
On the supply side, as Russia cut exports, other suppliers
filled the gap. Production turned out stable in 2022. The
Russian share in EU imports fell, from 43% in 2021 to 11% in
Q42022. However, these exports were diverted, albeit
partially, to (and via) China and Turkey. Predominantly
Norwegian and Azerbaijani pipeline gas, and US and Middle
East LNG covered Europe’s gas needs. LNG price rises drove
up US gas production. Inventories in Europe were filled
when entering the 2022-2023 winter and have remained
ample so far. In the US they are still also above five year
average. Production has been relatively high against demand
restrained by a mild winter and disruptions at the US export
terminal.
As prices are forecast to move sideward from now, they will
be significantly lower than in 2022. But they remain higher
than prior to the energy crisis. There is also some downward
pressure. In Europe, this is because LNG importing facilities
Atradius Economic Outlook – July 2023 | 6

are coming on stream. Challenges will remain, as for the2023-2024 winter there will be more fierce competition
from LNG from Asia, notably China. For Asia there will besome downward pressure on prices. For US prices there will
be some upward pressure in 2024 as demand will growmore quickly than production.
Global demand for gas will grow only marginally, with most
growth coming from China. In the US and Europe, demand is
expected to decline with the energy transition towards
renewables weighing in. Heavy reliance on LNG imports is
expected to continue in Europe. No significant overall gas
production increase is expected globally. The picture of
Russian gas production substituted by US (and to someextent Middle Eastern) LNG remains. A major risk is Russia
cutting off the remaining gas pipe line (and LNG) supplies toEurope.9
Coal. The situation for coal is somewhat different than that ofoil and gas. Prices are expected to fall in 2023 and 2024 but
remain higher than prior to the pandemic. After the peak in
2022, we have seen coal prices come down in Q1 2023 (q-oq) accelerating a Q4 2022 decline. But natural gas prices
have declined more significantly even to the extent that coal
has lost its competitive advantage in power supply. Carbon
emission price increases have contributed as well; coal isheavily carbon emission-intensive. Moreover, demand isdown as inventories are up due to a mild winter. Meanwhile,
production has started to increase, including in in Australia
and China. This, as well as the ongoing energy transition
away from fossil fuels, is setting the scene for further
downward pressure on prices for coal.

Lower but still elevatedcommodity prices
In our December 2022 Outlook we already mentioned thepressure on metals prices coming from the weak economic
environment and the fact that the Russian war had pushedthem up to unsustainable levels. Now, despite upward
growth revisions for 2023, a weak economic environment
remains, as does the said underlying downward pricepressures. In essence, the same story holds for prices of foodcommodities such as grain and oils.
Metals. Prices of metals rose in Q1 of 2023 on the back of
optimism for a strong recovery following the end of the zero
Covid-19 tolerance of China and a less-weak-than-expectedeconomic environment. Prices of all metals, though not steel,
were higher. But this is not sustainable, with prices expected
to decline in 2023 y-o-y and mostly flattening in 2024. For
steel, the outlook is even weaker. In the first months of theyear we have seen prices declining significantly, with abottom now likely to have been reached (Figure 1.9).

Figure 1.9 Commodity prices face weak demand

For an understanding of the steel price development, China
is critical, and in particular the Chinese developments inconstruction and infrastructure. Demand from those sectors
is expected to remain weak. China’s reopening should lead to
predominantly services-based growth. That does not seem to
fit in well with steel production growth in the early monthsof the year (January 2% y-o-y growth) and its expected
continuation. Hence the price pressure we have seen
recently. At the same time steel prices will be supported by
the Chinese production cap that the authorities have been
imposing, for a third year in a row now. This concurs with
our view that the worst may be over for steel prices.
The price of iron ore, an input for steel, has increased which
may not immediately look consistent with steel’s weakoutlook. Iron ore prices have risen by 27% q-o-q in Q1 2023 .
This is unlikely to be sustainable, as that rise reflected following the steel price rise - the initial optimism about
China’s reopening. As this fades, keeping in mind theChinese government’s control over steel output as well, so
will optimism about demand for iron ore. Moreover, thesupply side seems to aggravate matters. While shipments ofiron ore were reduced due to weather disruptions in the pastmonths, production is set to grow over the year. In the longer
term, supply growth will come from new mines in Australia,
Africa and Brazil, as Chinese production restraints are set tocontinue. Copper prices jumped 11% in Q1 2023 and are now
significantly above their long-term average. Here as well,
China’s recovery hopes played an important part, with China
accounting for 57% of global consumption. But that factor is
now fading.. Moreover the slowdown in real estate sectors insome advanced economies matters. On the supply side,
disruptions in mines in Chile, Peru and the Democratic
Republic of Congo chipped in for price support. Again, this isunlikely to last, hence the price decline forecast. Longer term
developments on the demand and supply side look morebalanced. Supply growth coming from American countries
and Russia as well as the Democratic Republic of Congomeets higher demand from the production of electricvehicles, renewable power and the power infrastructure.
Food. The grain price index eased almost 5% in Q12023 but it
remains elevated, just like the broader food index. The BlackSea Grain Initiative, which helped most of Ukraine’s grains

9

Russian gas is not subject to sanctions.

7 | Atradius Economic Outlook – July 2023

and oilseeds reach the world, and good harvests in othermajor regions eased price pressures. Indeed, the oil and meal
price index was more or less stable as the Russian war pricerise had gradually unwound. Both indices are expected toslide further during 2023 and 2024 assuming the said
initiative remains in place and harvests are good. The otherfood price index though, which includes oranges and sugarfor example, rose in Q1 of 2023 as a reflection of the recovery
in the global economy in conjunction with production
decline in Spain and Italy (both oranges). Slight increases of
the index are expected as Chinese demand increases after
the reopening.

inflation in the latest two months was negative. Food (which
includes alcohol and tobacco) was still very high at 11.7%,
after peaking in March. Eurozone core inflation, which also
strips non-energy industrial goods, is now stabilising at 5.4%.
Figure 1.11 Inflation on track to lower levels

Figure 1.10 Food prices remain elevatedInflation more persistentIn our December 2022 Economic Outlook we made a casethat the high inflation levels seen at that moment wereunlikely to persist. The reasons were the potential stagnationof GDP growth and numerous underlying factors such as
moderation of energy prices, as well as lower food andcommodity prices. The latter, as we have argued above, areindeed happening. The former, stagnation, now seems tohave been staved off. What does this mean for our view on
inflation? The answer is: fundamentally not much. Inflationis still expected to come down. But it is clear that the path ofdisinflation, as we call the decline of inflation, will be more
protracted. In other words, inflation is more persistent. It
may take us into 2024 before inflation is fully tamed.
Let us first look at the facts. On the back of lower energy
prices, headline inflation is beyond its peak and has started
to come down (Figure 1.11).
In the US, headline inflation reached a peak in June last year
at 9.1%, fell back to 7.7% in October and was at 4.9% y-o-y in
April. For the second consecutive month, energy inflation
was negative. Food inflation stood at 7% y-o-y. US core
inflation, which strips energy and food from headline
inflation, is higher at 5.5% and declining slowly after the
September 2022 peak at 6.6% y-o-y. Eurozone headline
inflation peaked, later and higher than in the US: 10.6% y-o-yin October 2022 and is now back to 5.5% in June. Energy

While food inflation is still high we observe the persistenceof inflation for both the US and Eurozone is particularly incore inflation. Underlying this is the gradual normalisationof demand after the pandemic. Demand switching back fromgoods to services such as travel, hospitality and events
causes more price pressure in the latter sector, and less in theformer. Services, moreover, are more labour intensive. Thatmeans more upward pressure on wages, from employeesdemanding compensation for the loss of purchasing power
as well as employers having to lure employees into services
in a tight labour market (in the US, and some of the eurozone
countries such as the Netherlands).
Meanwhile, the larger emerging economies paint a rather
divergent picture on inflation. China is at one end of thespectrum, with a March headline figure of 0.7% y-o-y, withlow food inflation, and moderate non-food readings as aresult of oil price weakness and even car price cuts. At theother end, we find Turkey where inflation reached 43.7% y-oy in April, although it is the first reading below 50% in a year.
Turkey is trapped in a range of country-specific issues, notleast the unorthodoxy of its economic policy (see emerging
economies section). In between are countries such as India
where the economy is cooling, with inflation 5.7% y-o-y in
March; Brazil where the economy is resilient, with inflation
4% y-o-y in mid-May; and South Africa which was plaguedby power shortages, with inflation 7% y-o-y in February.
With the exception of Turkey, this picture of inflationcompared to the US and eurozone suggests lower levels in
the emerging economies compared to the advanced
economies. This is indeed what research confirms.10 There
are several reasons for this. First, during the pandemic theemerging economies did not provide households with thestimulus package similar to advanced economies. As a result,
there was less of a pandemic and post-pandemic demand
push to inflation levels we saw in the US and the eurozone.
Second, central banks in emerging economies hiked interest

10

Inflation looks set to drop sharply, Oxford Economics Research
Briefing| Global, 16 March 2023.
Atradius Economic Outlook – July 2023 | 8

rates earlier than in the advanced economies, and even
before inflation started to run up due to energy and foodprice rises. Third, the monetary tightening in advanced
markets such as the US and eurozone also helped to bringinflation down in emerging economies, due to positive spillover effects. It kept money flows in the advanced economies,
rather than what happens in a low-interest-rateenvironment, when money often flows to emerging
economies, where it would have fuelled inflation.
The upshot is that inflation in the US and ECB is essentially ademand phenomenon. Conversely, as soon as demand starts
to decline once monetary tightening really kicks in, inflation
will come down. Just as it went up when governments
splashed money over the economy.11 As we have seen,
demand is expected to be rather weak in the advanced
economies as monetary policy tightens and government
stimulus has stopped. This is consistent with our view that
inflation is to come down significantly over the forecast
period. Inflation may be more persistent, but it is ultimately
not resistant to demand constraints.
For this view to play out over the forecast period there are
two conditions that should be met, focusing on the US andthe eurozone. First, it is of paramount importance that
inflation expectations remain well anchored. That is to sayaround levels close to the 2% mandate imposed by the central
banks in several major advanced markets. This is anobjective that should hold for the medium term. In otherwords, households and firms should remain convinced thatthe central banks are capable of ‘killing the beast’ over someperiod of time. They should be credible. What do surveys tell
us in this context? (see figure 1.12) Whereas inflation
expectations in the short term, being one year ahead, aredeclining but arguably still deviate from the 2% target this is
not the case for longer term expectations. These have edged
up somewhat since the crisis, but remain well anchored.
Second, and in close connection with the inflation
expectation argument, wage increases should be contained
and clearly not surpass inflation. That would mean a vicious
wage-price spiral, which could drive inflation out of control,
is avoided.
Figure 1.12 Inflation expectations signal confidence maintained

What do current developments tell us here? (Figure 1.13) The
fact that wage growth in the US is a lot higher than in the
eurozone does not come as a surprise given the relative
tightness of the US labour market (3.4% unemployment
versus 7% in the eurozone). While stabilising at a high rate,
US wage growth remains lower than inflation. Then for the
eurozone, where data lag a bit, we still see increasing wage
growth. But that growth is (very) far from the inflation levels
the eurozone witnessed. With these two conditions arguably
met, we feel sufficient support for our view.
Figure 1.13 Wage pressures far below worry levels

Further support for our view is found in the following factorsof key relevance for inflation. First, elaborating on the
demand story above, inflation as such has a limiting impact
on purchasing power, and thus on demand and – ultimately
indeed - on inflation itself. In countries where government
support during the pandemic was generous this effect may
be cushioned by the use of excess savings, but even that has
its limits. Second, barring a new shock, energy andcommodity prices are expected to move sideways or evenslide as we have argued above. As we have argued inprevious outlooks, even a sideward move of prices will havea dampening impact on inflation. That is because if the priceof oil is at say USD 85 per barrel now and it is unchanged
compared to last year, the inflation contribution of the oil
price is zero. That is the so-called base effect. Third, as aresult of the ongoing switch of demand away from goods toservices, the pressure on manufacturing and supply chain
diminishes. We have discussed that above: the supply chainpressure index is back to normal, or even below it. Precisely
supply chain pressures as well as transport cost spikes
contributed significantly to the rise of inflation. Then, we can
expect inflation from that source to disappear as well.

Monetary policy right about
inflation persistence
In our December 2022 Economic Outlook we made the casefor monetary policy tightening to end and reverse, although
we refrained from mentioning a time frame. There was still

11
The US government topped the list with a 12% of GDP pandemic
stimulus program.

9 | Atradius Economic Outlook – July 2023

some hint of the argument that inflation could be transitory
in that judgement. That was based on the idea that if theunderlying causes of the inflationary spike, such as surplus
demand for goods during the pandemic and energy and foodprice spikes after the Russian invasion, were to disappear,
inflation would fade as well. In such a context, the aggressive
monetary policy tightening observed could only be
explained by the central banks’ worry about inflation
persistence. Six months on, it is indeed exactly persistencethat we are witnessing, and especially persistence in core
inflation.
As we have become convinced, central banks, especially the
Fed and the ECB that worried before us, have only become
strengthened in their views. And they have continued to act
in line with that. The Fed has further hiked its policy interest
rates during all of the FOMC meetings,12 from 4% in
December to 5.25% in May. The pace has declined though,with the last four steps only 0.25 ppt hikes every meeting, incontrast to the giant steps of 1.25 ppt since June last year.
Interest rate hikes are backed up by the reduction of the Fedbalance sheet that ballooned to almost USD 9 trillion from
USD 4.2 trillion during the pandemic. This reduction takes
place by capping reinvestments of principal payment on
securities, USD 80 billion for Treasury securities and 35
billion per month for mortgage-backed ones. Its pace israther modest: after almost a year, the current stance of thebalance sheet is USD 8.4 trillion. The Fed has to tread
carefully here to avoid disruptions in the financial markets
that are accustomed to ample liquidity.13 While the balance
sheet reduction is continuing, the Fed has indicated further
rate hikes are now less likely, although incoming data,
especially regarding the tight labour market, may trigger
further action.

Figure 1.14 Quantitative tightening restrained

Figure 1.15 Steep interest rate rises

The ECB has continued on its tightening path, also slowing
down the pace after two large steps in the autumn of 2022.
Since December three steps of 0.5 ppt interest rate rises wereannounced, followed by two 0.25 ppt hikes in May and June
to 4.0%. In contrast to the Fed, the ECB has indicated that its
hiking, which started when the Fed rates were already at
1.75%, has not yet ended. Similar to the Fed though, the ECB
terminated its net purchases under the asset purchaseprograms in July 2022. That neutralises the balance sheet
growth. Balance sheet reduction started in March this year,
as from that month there will only be partial reinvestmentsof redemptions.

The overall picture is that monetary tightening is clearlyslowing while the balance sheet normalisation continues.
How should we interpret this policy development since lastDecember now that inflation persistence, especially core
inflation persistence, is still around? There are several points
worth making. First, now that the persistence of inflation has
become indisputable, central banks were right with their‘better-safe-than-sorry’ approach of aggressive tightening by
way of interest rate hikes during 2022. The fact that inflation
expectations have not moved significantly, which is criticalfor inflation not to run out of control as we argued in theprevious section, testifies that central banks have remained
credible. Second, we estimate that current policy rates are
actually sufficiently high to restrain demand (see box). Third,
if the second point indeed holds we still have the question
whether enough tightening is being done to bring down
inflation and eliminate core inflation. In other words, havethe central banks done enough and is the current slowdown
justified? The situation became more complex when banking
turmoil erupted. (see figure 1.16).

12

13

FOMC stands for Federal Open Market Committee, the Fed bodytaking the monetary policy decisions.

During the banking sector turmoil of March the balance sheet
reduction was indeed interrupted, even briefly reversed, for thatreason.
Atradius Economic Outlook – July 2023 | 10

Figure 1.16 Banking turmoil predominantly in US

In early March, Silicon Valley Bank of California came understress, as did New York-based Signature Bank and later First
Republic Bank. The US authorities quickly reacted andprevented contagion effects in the banking sector.14 But theunderlying issue became clear. Rapid monetary tightening
has a price. It reduces the market value of bonds held bybanks which for more vulnerable banks may lead to deposit
runs and failure. While we do not see a new crisis on thehorizon, the banking sector, especially in the US, may facesome more failures.15 What we do see, however, is that banks
are becoming more careful, limiting lending to firms andhouseholds. In other words, the rapid tightening has a sideeffect, or externality, in the sense that it limits the necessityof further tightening by the central bank. In fact, part of theheavy lifting of demand reduction is now being taking overby banks that restrain lending. That is what interest rateincreases also attempt to achieve, and have achieved: a risein financing costs (Figure 1.17). If one considers these points,
the conclusion is that monetary policy by the Fed and the
ECB is right about inflation persistence.
Figure 1.17 Sharp rises in borrowing costs as wellBox 1 Does the central policy rate actually restrain
demand? In this context in the previous outlook weelaborated somewhat on the natural rate of interest,
which is the interest rate that is neutral from a demand
perspective. If the actual rate is below the natural rate, thepolicy stance is expansive, but contractionary if it isabove it. The natural rate is not observable, it can only be
estimated. Recent IMF research signals that this rate isjust below 1% for the US and just above zero for Germany
and France.16 One should be aware that this is a real rate,
meaning the nominal rate corrected for inflation
expectations. If we then calculate the current real rate ofinterest for the US it is 5.25% and subtract the one year
inflation expectation of 2.75%, we end up at 2.5%. This is
above the natural rate, signalling a contractionary stance.
For the eurozone, a comparable calculation gives 3.75% 2.75% = 1%, also above the natural rate and thus
contractionary if we apply this figure for Germany as well
as France. Therefore, in this calculation we find some
support for monetary tightening restraining demand. We
point in this context to the confidence bands of the point
estimates that are used for the natural rate. For the US it isbetween 2% and -0.5%, for France and Germany it isbetween 2% and -2.5% and 3% and 0.25% respectively.

Some government support for
central bankers
As mentioned earlier in this chapter, during the pandemic,
governments, especially in advanced economies, stepped inwith large packages to soften the blow of the containment
measures. That demand stimulus has kept the global
economy going, but at the same time generated a side effect:
inflation. First goods inflation and subsequently services
inflation. But as stimulus packages are running down, so istheir inflationary impact. But is this the case? The Russian
war further pushed up inflation through energy inflation,
creating a sense of energy crisis in Europe. It triggered
government reaction to soften that blow, including
announcements of plans to accelerate the energy transition.17
This response was much softer than during the pandemic,
but still has the same impact: inflation, or perhaps
restraining disinflation. This raises the question: what aregovernments doing while the central banks are fighting
inflation? Are they backing them up sufficiently?
To evaluate this we need to consider the development of thestructural government balance.18 From the very high level of
7% deficit in 2020, the figure for the advanced economies has

14

By extending the deposit guarantee beyond USD 250,000, also
for other banks, and providing liquidity support.

15

See ‘Fears of a banking sector crisis overdone’. Atradius Economic
Research Notes, April 2023.

16

The natural rate of interest: drivers and implications for policy.
Chapter 2 of the World Economic Outlook, International Monetary
Fund, April 2023.

11 | Atradius Economic Outlook – July 2023

17
18

See Atradius Energy Outlook, February 2023.

It is the government balance divided by GDP, both adjusted forthe business cycle.

come down to 4.5% in 2022. This is indeed what can be calledfiscal tightening and is suggestive of governments that
support a disinflationary process. At the same time, thisseems to be it for now: the 2023 and 2024 forecast at 4.6%
and 4.3% respectively signals only mild further tightening,
and leaving a significant amount of stimulus in place.
Indeed, the five-year average figure before the pandemic
was at 2.4%.
Looking into the group of advanced economies, the picture isfairly heterogeneous (Figure 1.18). We make threeobservations. First, in 2022 very significant fiscal tightening
took place, particularly in the US and UK, less so in the
eurozone. Indeed, the US figure peaked at 11.4% in 2020 to be
reduced to 3.7% in 2022, with a similar though slightly lesspronounced pattern seen for the UK. For the eurozone, thefigure came down from only 4% in 2020 to 2.8%. Second, theremaining levels imply that in 2022 there was a lot morestimulus from the government in the US and the UK than in
the eurozone. This picture is not expected to change
significantly over the forecast horizon, with the US and UK
figures even edging up again. The eurozone structuralbalance figure only rises in 2023 and then falls somewhat, to2.5%. Third, within the eurozone group of countries there isquite some heterogeneity. Spain has tightened significantly
by reducing the structural deficit from 6.7% to 4.2% in 2022, acase that can also be made for Italy. Germany on the other
hand has hardly tightened with figures of 2.2% and 2%
respectively. This also signals that stimulus levels in the
eurozone differ. Spain falls more in the range of the US and
UK, whereas thrifty Germany seems a bit of an outlier in the
eurozone. In 2023 and 2024, with Germany forecast to evenbring back stimulus to only 1%, this conclusion is reinforced.
In short, one can infer from this overview that the US and UK
have been significantly more zealous in helping to reduce
inflation than major eurozone countries, perhaps with the
exception of Spain and Italy.
Figure 1.18 Government debt far above thresholds

keep supporting the economy with large programs fell away.
The energy crisis triggered support programmes in various
eurozone countries, but these pale in comparison with the
pandemic ones. Second, structural deficits seen during 2020,
let alone those in the range of 9% to 11% for the US, the UK
and Italy, are not sustainable. They have pushed up debt-toGDP levels by an average of almost 20 ppt for the advanced
economies that year, and for countries like the US and Italy
to above 150% of GDP. For reference, the threshold level ofthe IMF for debt-to-GDP for the advanced economies is 90%.
This will not be achieved by most of the countries (see figure1.19). Third, and in close relation to the previous point, higher
interest rates that come with monetary tightening will
ultimately show up in the government balance as a cost. That
will be a gradual process, as debt repayments on government
bonds are usually spread over a number of years. It willallow governments time to adjust, with spending now
naturally lower for a given government balance. Fourth,whereas fiscal tightening supports disinflation, inflation as
such helps fiscal tightening as well. The point here is that asnominal GDP rises simply because of a rise in the priceindex, so do government tax revenues. Spending increases,on the other hand, are usually nominally fixed in advance.
This means inflation reduces the government balance. It
should be noted that this effect cannot create magic forgovernment finances. It only works if there is an inflation
surprise, as took place recently. Only in that case caninvestors be fooled as they do not properly account for
inflation in the interest rate they demand. Similar for aparliament that sets limits for government spending. 19
For the emerging economies, the picture is different in a
number of ways. Large government programmes to support
the economy during the pandemic were not rolled out, with
Brazil a notable exception. As a result, the structural balancein 2020 in India and China did not markedly change
compared to the pre-pandemic year. And thus neither did theinevitable fiscal tightening visible in the advanced
economies after the pandemic occur. Yet, these countries,
with the notable exception of China, are feeling the impact ofinflation due to global developments particularly thosesourced in energy, metals and food price rises. Monetary or
fiscal policy tightening helps here. The former has happened
and even started before the Fed hiking cycle. The latter, if
one looks at the development of structural balances in China,
India and Brazil, less so. They are relatively high ascompared to the advanced economies, and will remain soover the forecast horizon (Figure 1.19).

To further interpret this picture, the following remarks are
relevant. First, fiscal tightening was inevitable after the large
stimulus during the pandemic. Simply, with the pandemic
and the accompanying healthcare measures affecting the
economy disappearing over the course of 2022, the need to
19

The other notable effect of inflation on government finances isthat debt-to-GDP levels are pushed down. This is because debt is anominal amount, unaffected by inflation, whereas the denominator,
nominal GDP, includes inflation.
Atradius Economic Outlook – July 2023 | 12

Figure 1.19 Fiscal policy remains lax

What if inflation persistence isdeeper rooted
In the previous sections we have drawn the picture of aworld in which inflation, and more in particular core
inflation, is somewhat more persistent than initiallyenvisaged. At the same time, this persistence is not expectedto last, let alone surprise to the upside. Indeed, central bankrate hikes are now coming to an end, based on confidence
that there is some lagged demand effect of the previous rate
hikes that is still to work its way through the system.
Banking sector turmoil, especially in the US, and its impact
on lending conditions, compounds this effect. Inflation will
come down to central bank mandate levels somewhere in
2024. GDP growth will be weak but gradually pick up.
But what if our forecast underestimates the pace at whichthese effects work out so that inflation remains higher for
longer? Or even worse, if they stop working through andleave the inflation level, core inflation level for that matter,(much) higher than envisaged?
In such a case, central banks are no longer allowed to sit on
their hands, a position they are now moving to. They will
have to react with further rate hikes to root out inflation andin that way maintain their credibility. That may be one hiketoo far for the global economy, already weak because of

13 | Atradius Economic Outlook – July 2023

inflation and the (monetary) policy reaction. Effects now
seen in the financial markets will be exacerbated in thefollowing scenario. Equity prices fall by more than 10% andstart to generate adverse wealth effects, especially for the US
consumer. Such a negative wealth effect is reinforced byperils in the housing market as mortgage costs will surpass
threshold levels. The cost of capital for firms goes up further,with a negative impact on investments. Banking sector
jitters will transform into real turmoil that may not belimited to the US banking sector, further reinforcing theimpact of central bank tightening. Governments restrainedby higher debt ratios, are not able to (and in fact should not)step in to keep the economy afloat. The US and eurozone
economies enter a worse economic environment. Emerging
economies are also not safe, as the continuation of US rate
hikes triggers capital flows to the US. This can be counteredby further rate hikes by the authorities in these emerging
economies, with a negative impact on GDP growth, or they
can accept the outflow of capital. In the latter case emerging
economies will have to deal with the impact of imported
inflation through currency depreciation, and indeed, will
have to hike rates in the end as well. In short, this scenariomeans an even weaker global economy, in particular for theadvanced economies (figure 1.20).
Figure 1.20 The impact of deeper-rooted persistent inflation

2. Developments in major economies
Advanced economies facingtighter credit conditions
While the resilience of consumers across advanced
economies has continued to surpass expectations in H1 2023,
it will fade in H2 as higher prices and borrowing costs
increasingly impact their purchasing power. Decreasingenergy prices have offered relief, helping turn consumer
confidence around, but higher interest rates are finallyfeeding into a tightening of credit conditions. We project GDP
growth across advanced markets to reach 1.0% in 2023,
better than the stagnation expected at the beginning of theyear due to consumer resilience. But as the effects ofmonetary tightening are increasingly felt, the growth
outlook remains drab, with only 0.9% growth now forecast in
2024, compared to 1.8% expected at the beginning of theyear.

GDP growth is expected to come in at 1.2%, 0.9 percentage
point below our expectation six months ago.
Figure 2.1 Positive growth revisions for 2023

Table 2.1 Real GDP growth (%) – advanced markets
2021

2022

2023f

2024f

Eurozone

5.3

3.5

0.6

1.2

United States

5.9

2.1

1.3

0.4

United Kingdom

7.6

4.1

0.4

0.8

Japan

2.2

1.0

0.8

Table 2.2 Real GDP growth (%) – eurozone
2021

2022

2023f

2024f

Austria

4.7

4.9

0.5

0.8

0.7

Belgium

6.3

3.2

1.3

1.0

6.4

2.5

0.5

0.8

2.6

1.9

-0.4

1.2

Australia

5.2

3.7

1.6

1.6

FranceNew Zealand

6.0

2.2

-0.6

2.9

Germany

Advanced economies

5.4

2.6

1.0

0.9

Greece

8.1

6.0

1.3

1.0

Ireland

13.4

12.1

0.5

4.4

Sources: Oxford Economics, Atradius

Italy

7.0

3.8

1.2

0.9

Eurozone: upward revision to 2023
growthNetherlands

4.9

4.5

0.7

1.4

Portugal

5.5

6.7

2.7

1.5

Spain

5.5

5.5

2.3

1.3

Despite the challenging global context, the eurozone is on astronger footing than we expected six months ago in the
December Economic Outlook. A number of positive
developments underpin the improved outlook. The European
gas price has fallen significantly, helped by a sharp fall in gas
consumption and continued diversification of supply
sources. Labour markets have also continued to perform
strongly. Finally, economic sentiment has continued to
improve. Our latest forecast is for GDP to expand by 0.6% in
2023, 0.7 percentage point higher than six months ago. This
growth revision takes place among all major economies(figure 2.1). The growth outlook for 2024, however, has beenrevised down due to lingering effects of high inflation anddelayed effects of monetary tightening. In 2024, eurozone

Eurozone

5.3

3.5

0.6

1.2

Sources: Oxford Economics, Atradius

Eurozone GDP declined by 0.1% quarter-on-quarter in Q1 of2023. This was the second quarter of negative growth,meaning the eurozone is officially in a recession, though avery shallow one. There remains significant divergenceacross the region. In Q1 there were decent quarterly growth
rates in some countries, such as Portugal (1.6% q-o-q growth),
Spain (0.5%) and Italy (0.6%), but disappointing growth inothers, such as the Netherlands (-0.7%) and Germany (-0.3%).
Many indicators suggest the growth momentum remains
weak in Q2. The European Sentiment Indicator (ESI) declined
from 99.0 in April to 96.5 in May, remaining below theneutral level of 100.
Atradius Economic Outlook – July 2023 | 14

The purchasing managers’ index (PMI) was 52.8 in May,
above the neutral level of 50, but with a clear divergence
between the services sector and manufacturing. The services
PMI (55.1) points to robust growth, while the manufacturing
PMI (44.8) points to a contraction of activity. The
manufacturing PMI has been showing a declining trend forseveral months, mostly because of worsening demandconditions. New orders, international demand, and backlogs
of work are declining, the latter in clear evidence of risingspare capacity in the eurozone. The services PMI, on theother hand, was showing a positive trend, except in the lastmonth (May). Services are benefitting from high demand andbacklogs of work have increased. Companies have steppedup their efforts to boost capacity, with employment levels
rising.
Export and investment growth slowing
In line with a cooling global economy, export growth in the
eurozone is also slowing. The slowdown in export growth issomewhat inhibited by the good performance of the tourism
sector. Falling energy prices also contribute to lower import
growth, so that net trade contributes positively to GDP
growth in 2023.
Tightening financing conditions and the global economic
slowdown weigh on investment growth in 2023, but there
are countervailing factors at play. Corporates still have an
overall healthy balance sheet. Moreover, investment surveys
still show that in both manufacturing and services
companies overall expect more investments in 2023
compared to 2022. In 2024, we expect a broader recovery totake hold and to lead to higher investment growth.
Consumption growth cooling down
Private consumption remained roughly constant over the
past two quarters, in contrast to the six quarters before that,when consumption grew robustly on the reopening of theeconomy after Covid. For 2023, we predict only very mild
consumption growth of 0.2% y-o-y due to high inflation andtighter credit standards. As we expect inflation to come downin the second half of the year, the outlook for 2024 is slightly
better (1.7%).
The labour market in the eurozone remains resilient. The
latest unemployment figure (6.5% in April) shows that thelabour market is still tight. Total employment in the
eurozone increased by 0.6% on a quarterly basis in Q1 of2023, following a 0.3% increase in Q4 and Q3 2022.
Employment growth is coming mainly from businessservices and public services. Construction is making a mildly
positive contribution. In industry, we see hardly any
employment growth in recent quarters. For 2023, we predict
an average unemployment rate of 6.6%.

15 | Atradius Economic Outlook – July 2023

Figure 2.2 First signs of accelerating wage growth

Finally, the first signs are appearing of accelerating wage
growth: the indicator of negotiated wages increased by 4.3%
year-on-year in Q1 of 2023, up from 3.1% in H2 2023 (figure2.2). However, with inflation still elevated, real wages
remain in negative territory (-3.7% in Q1 of 2023). Given thetight labour market, we still expect further wage pressure in
the coming quarters. In combination with declining inflation,
this should give support to consumers’ purchasing power in
H2 2023 and in 2024.
Inflation past its peak, but remains sticky
Headline inflation continued to decline in the first months of2023 amid a sharp deceleration of energy prices (figure 2.3).
The decline in inflation from 9.2% in December to 5.5% inJune was driven by the energy component, which over thesame period saw annual price growth decelerate sharply
from 25.5% to -5.6%. Food inflation remained high in recent
months, amounting to 11.7% in May 2023. Core inflation(excluding food and energy) increased slightly in June to
5.4%, from 5.3% in May. Core inflation thus remains
relatively high.
Figure 2.3 Energy prices exert downward pressure on inflation

The rise in core inflation is mostly driven by services. Pricepressure in services firmed in early 2023 particularly incontact-intensive services such as transport and package
holidays. This suggests that reopening effects continue toplay a role, particularly in sectors where persistently highdemand interacts with supply-side challenges, including
energy costs, labour shortages and accelerating wage
growth. Inflation of non-energy industrial goods appears tohave peaked in the early months of 2023 as impulses relatedto pandemic shocks were fading out. We expect declining
headline inflation in the second half of 2023, leading to an
average inflation rate of 5.3% this year. In 2024, we expect
inflation to be 1.4%.

deficit reduction in 2023 and mildly positively in 2024. In
this scenario, the budget deficit for the eurozone remains
above the 3% target stated in the Stability and Growth Pact.
Figure 2.5 Eurozone deficit and debt remain highEurozone government finances

Lending conditions tighten
The ECB continued its historically rapid tightening campaign
at June’s council meeting. It hiked the deposit rate by 25 bps,
following a similar hike in May. This brought the mainrefinancing rate to 4.0%. The ECB will discontinue
reinvestments under the Asset Purchase Programme (APP)
as of July 2023. It does intend to continue reinvestment ofprincipal payments of the pandemic emergency purchaseprogramme until at least the end of 2024. On balance, thesemeasures contribute to a winding down of the ECB balance
sheet, which is still elevated compared to pre-pandemic
levels. The ECB continues to follow a data-dependent
approach to monetary policy. We expect one further rate
hike in July, after which the ECB is likely to implement alengthy pause in its monetary tightening cycle.
While the ECB still sees inflation as “too high for too long”, it
does acknowledge that the past rate increases are beingtransmitted to euro area financing and monetary conditions.
This became very clear from the Q1 2023 bank lending
survey. Credit standards for business loans tightened further
substantially (with the net percentage of banks reporting atightening standing at 27%) in the first quarter of 2023.
Banks also reported a further tightening of their credit
standards for mortgage lending and to a lesser extent for
consumer credit (net percentages of banks at 19% and 10%
respectively) (figure 2.4).
Figure 2.4 Credit standards are tightening

0

100

-2

95

-4

90

-6

85

-8

80
2015

2016

2017

2018

2019

Government debt, % of GDP, rhs

2020

2021

2022

2023

2024

Government structural balance, % of GDP, lhs
Source: Oxford Economics, Atradius

Due to sustained fiscal stimulus measures, eurozone
government debt also remains high: an estimated 91% of GDP
in 2022, and an average of 90% in 2023 and 2024. At thesame time, there are several member states withsignificantly higher debt, such as Italy and Greece. Although
short-term debt sustainability risks are limited, several
member states with high government debt cannot afford to
do nothing about their budgetary policies in the long term.

United States: costlier credit
squeezes economic growth
While the US economy has demonstrated resilience since therecovery from the pandemic, we expect a mild recession totake hold in H2 this year. Pent-up savings, high employment
and increasing wage growth have helped consumers keep
the economy afloat in the face of rising interest rates andbanking sector jitters, motivating a substantial upwardrevision of our 2023 growth forecast to 1.3% from -0.4%. But
this resilience has essentially postponed the inevitableslowdown to H2 2023, setting a weak starting point for 2024.
Our forecast for 2024 has accordingly been revised
substantially lower: 0.4%, compared to 1.4% six months ago.
Mild recession to begin in Q3

Fiscal policy remaining expansive
Adjusted for the business cycle, the government deficit
declined in 2022 to 3.3%, from 4.3% in 2021. The deficit
reduction was underpinned by the phasing out of pandemicrelated temporary measures. The estimated net budgetary
cost of energy support measures was 1.2% in 2022 (at the EU
level). We expect a continued reduction of the structural
deficit in the coming years, to 2.6% in 2023 and 2.1% in 2024
(figure 2.5). In 2023-2024, the deficit reduction is driven
primarily by discretionary policy measures such as aphasing out of the pandemic emergency measures. The
cyclical component is expected to contribute negatively to

Annualised GDP growth fell to a modest 1.3 in Q1, a marked
slowdown from the 2.6% expansion recorded in Q4 of 2022
(0.3% from 0.6% respectively in quarterly terms). Consumer
spending grew robustly at 3.8% y-o-y, the fastest rate since
the vaccine rollout in mid-2021. Consumers continue tobenefit from a strong labour market and rising wages, whichhave driven resilience in the face of rising prices and higher
borrowing costs. Unseasonably warm weather further
helped. The remarkable strength of private consumption in
Q1 was offset by weak investments. The slowing housing
sector dragged fixed investment’s growth contribution tonearly zero. Inventory investment remains very volatile assupply chains normalise and has been the largest drag on Q1
growth, with the wholesale trade sector seeing the sharpest
Atradius Economic Outlook – July 2023 | 16

declines, followed by manufacturing, as businesses respondto slowing demand with slower stockbuilding.

Figure 2.7 US core CPI lagging headline disinflation

Figure 2.6 US consumers set to tighten purse strings in H2

We expect that inventories continue to drag on economic
growth in Q2, as businesses stay pessimistic concerning their
expectations for consumer spending. Private consumption is
likely to have slowed but continues to keep economic growthafloat. Payroll and wage gains continue to support
disposable income growth as excess savings still underpin
capacity to spend. Job creation keeps exceeding
expectations, especially in construction, transport andbusiness services sectors, bolstering continued spending
prospects.
Cracks are beginning to show though and we expect
consumption to drag on growth in H2, bringing the US
economy into a mild technical recession (two consecutive
quarters of negative quarterly GDP growth). Unemployment
has ticked up to 3.7%. The personal savings rate has been
gradually increasing, reaching 4.1% in April compared to a
low of 2.7% in June 2022, signalling that US consumers are
growing more cautious. The outlook for continued spendingof excess savings also continues to dim as most remaining
pandemic-era savings are held as wealth in higher-income
households.
Government consumption will be the largest drag on
economic growth in Q3 and Q4 as the fiscal stance turns
contractionary. The pandemic-era fiscal stimulus was
unprecedented in recent history (5.3% of GDP in 2021). In
2023, fiscal policy will likely be contractionary at -0.5% ofGDP. With a divided Congress and spending controls
imposed by the June debt-ceiling deal, the likelihood ofgovernment support to GDP growth is very slim.
Slowdown offers some relief for price pressures
The weaker demand outlook for H2 does bode well for
inflation though, which remained more than double theFed’s target in Q1. The May figures have already offeredsome relief to consumers and policymakers as headline CPI
inflation eased to 4.0% from 4.9% the month before. Energy
price deflation is the culprit, however, and core CPI fell muchless substantially to 5.3% from 5.5%.

17 | Atradius Economic Outlook – July 2023

Similar to the consumer outlook, inflation data continues tooffer a very mixed picture of the health of the US economy.
The downward trend, however, has proven sufficient – inconjunction with early signs of lower consumer spending –to allow the Federal Reserve to pause its monetary
tightening cycle. Headline inflation is likely to continue its
decline in the coming months, supported by thenormalisation of supply chains and falling commodity
prices. The pace will remain steady due to base effects, given
its peak was in the same time window in 2022. Core inflationon the other hand does not have the same base effect trend
and is only expected to ease gradually as the impact ofmonetary tightening 6-12 months earlier feeds into demand.
Concerns for stickiness in core inflation are also easing given
the deceleration in wage growth underway.
Access to credit increasingly squeezed
One of the key drivers of our outlook for disinflation and aminor downturn in H2 is the significant tightening in credit
conditions underway. The Fed’s latest bank lending practicesurvey shows access to credit for both businesses andhouseholds has decreased. Figure 2.8 shows the net share inbanks tightening their lending standards to companies andhouseholds to be increasing sharply in the first two quartersof 2023. Lending conditions for commercial real estate loans
are the tightest, nearing 80% where they stood at the peak of
the pandemic lockdown. Given the limited return to office
work, investors are wary of commercial real estate and the
Fed has increased monitoring of banks with high CRE
concentration risk. Overall, banks cite expected deteriorationof their credit quality amid an economic downturn andincreasing bank funding costs to be behind their lower
willingness to lend.

Figure 2.8 US lending conditions increasingly restrictive

even greater concern, core inflation rose to a new 30-year
high of 7.1% in May, showing the UK is not out of the woods
yet (see figure 2.9). The BoE’s Monetary Policy Committee(MPC) responded accordingly by hiking its official interest
rate by 50 basis points to 5%, the highest level since
September 2008.
Figure 2.9 UK core inflation’s rise alarms policymakers

This is essentially the desired effect of monetary tightening
as more expensive borrowing should reduce consumer
spending, company hiring and investment, in turn easing thepressure on price growth. Evidence of this, alongside somesigns of easing demand in the real economy and disinflation,
will allow the Federal Reserve to shift into wait-and-see
mode now, as discussed in Chapter 1. This should allow theeconomy to absorb the current high rates without sparking acredit crunch. Healthy household balance sheets and a tightlabour market should ensure the downturn will be shallow,
reducing the need for the Fed to lower rates prematurely.

UK outlook clouded by higher-forlonger interest rates
The UK’s economic fortunes have improved since December
but its challenges remain uniquely elevated. At the start of
the year, we expected the UK to contract 0.7% in 2023, theworst performance in the G7. Its consumption-dependent
economy is grappling with rising costs of living and theeffects of Brexit on international competitiveness. Consumer
resilience has helped the economy avoid recession so far in
2023 though, and a positive shift in policymaking should
help keep GDP growth in the black this year at 0.4%. Stickierthan-expected inflation is driving more aggressive monetary
tightening which will keep growth low at 0.8% in 2024,
compared to 1.8% expected six months ago.
Economic growth has lost some steam so far this year,
weighed down by industrial disputes and some temporary
drag from the King’s coronation in May. But slowing
headline figures mask the resilience of private consumption.
Direct fiscal support to households to help pay energy bills
helped bring consumer confidence to its highest level since
Russia’s invasion of Ukraine. The labour market is very tightwith only 3.8% unemployment and total wage growth has
picked up to 6.5%. In real terms, wage growth remains
negative at -2.0% but is beginning to turn up as inflation
eases.

We expect the MPC to follow this with another 0.5
percentage point rate hike in its upcoming August meeting.
Its latest policy statement has taken a hawkish tone,suggesting that tighter credit conditions for borrowers may
be a price to pay to contain inflation - the top priority. With
only one more month of inflation and labour market data
coming in between, it’s unlikely to sway this position.
Beyond that, we anticipate another quarter-point hike in
September before pausing, as the effects of recent tightening
feed into the real economy. That would make a peak interest
rate of 5.75%, compared to our previous expectation of 4%
which will exert more of a drag on the UK economy, keeping
growth sluggish over the forecast period.

Advanced Asia outlook weakens
We expect Japan’s economic growth to slow further to 0.8%
in 2023, continuing the loss in momentum since H2 2022.
Lacklustre growth will likely continue in 2024, with only
0.7% growth. Private consumption continues to be supportedby the improving labour market, accumulated savings
during the pandemic and transfers included in the latest
fiscal package. The labour market remains strong, thoughunemployment went up a bit in March (to 2.8%, from 2.6% in
the month before). Several factors continue to weigh on
consumption growth, however, such as elevated inflation (byJapanese standards), high uncertainty and a fading impact ofreopening. Both headline and core inflation remain elevated
at 3.4% and 4.1% respectively. Core inflation is even at its
highest level since 1981.

Ongoing consumer resilience is forcing the Bank of England(BoE) to tighten its monetary policy more aggressively whileother central banks have been slowing down or pausing
their cycles. While headline inflation has cooled off slightly
from its peak of 11.1% in October 2022, the May 2023 reading
disappointed as it was unchanged from the month before. Of
Atradius Economic Outlook – July 2023 | 18

Figure 2.10 Japanese economic outlook remains lacklustre

structural weaknesses and political uncertainty, will lag
other regions.
Table 2.3 Real GDP growth (%) – major emerging markets
China

2021

2022

2023f

2024f

8.5

3.0

5.5

4.6
6.4

India

8.9

6.7

5.6

Brazil

5.3

3.0

1.8

1.0

Mexico

4.9

3.0

1.8

1.0

Russia

5.6

-2.1

0.7

1.7

Turkey

11.4

5.6

2.1

1.5

South Africa

4.7

1.9

0.2

1.0

Sources: Oxford Economics, Atradius

Weak external demand is causing export growth to slow anddrag on headline growth. Despite some gains in auto
shipping in H1, overall exports have been dragged down by
fewer capital goods demands which we expect to continue inthe coming quarters. Fiscal policy remains supportive ofgrowth this year following a large fiscal package announcedin October 2022. The stimulus includes subsidising prices ofelectricity, gas, oil, and cash transfers to couples withchildren. This is likely to lead to keeping the fiscal deficit
elevated at 5.8% in 2023, with prospects of a somewhat lower
deficit in 2024 as some measures are phased out, resulting ina contractionary effect on next year’s GDP growth.
Weakening domestic conditions are weighing heavily on
Australia and New Zealand’s economic prospects as well.
Australia’s economic growth is slowing to 1.6% in 2023 and2024, rates well below its long-term trend due to more
persistent inflation and higher interest rates. Inflation
appears to have peaked in Q4 2022 but remained high at 7.1%
in Q1 2023. Disinflation will stay slow as services prices
continue to rise, despite goods prices declining. The
historically tight labour market is also supporting resiliencein the face of current headwinds, ensuring only a gradualdecline in prices. New Zealand’s economy entered recessionin Q1 2023 as investment declined and consumer spending
stalled. House price falls and tight monetary policy are being
exacerbated by the devastation from Cyclone Gabrielle.
While reconstruction efforts should boost construction andinvestment since Q2, the weak consumer outlook willcontinue to drag on activity in 2023.

Asia: China and India
We expect the Chinese economy to grow by 5.5% in 2023,
which is 1.3 percentage points higher than our forecast fromsix months ago. Growth is supported by a rapid
normalisation of consumer spending, after the economy
reopened from the Covid lockdowns in early 2023. Even
though the current surge in consumption will lose
momentum once the level has broadly normalised to prepandemic times, we do think the rebound in household
consumption still has legs into Q2 2023. We forecast GDP
growth to weaken to 4.6% in 2024, on the back of weakening
consumption prospects and lower investment growth.
The Chinese economy saw a sharp consumer-led rebound in
Q1 2023. At 4.5% year-on-year, the Q1 GDP growth was above
expectation. Consumer and services-related segments raced
ahead. Retail sales in particular jumped 10.6% y-o-y, driven
by dining out services and to a smaller extent automobile
sales. Investments remained weak (5.1% y-o-y), with overall
growth very much supported by state investments. Property
investment remained sluggish at -5.9% y-o-y, in contrast to
relatively buoyant property sales, reflecting caution amongproperty developers.

Emerging economies staying in
low gearHousehold consumption growth can likely keep momentum
into Q2, given the recent savings trend. Beyond that, a moresustained consumption boost would require either higher
confidence, or for consumers to dip into their excess savings.
For 2023 overall, we forecast a very robust consumption
growth of 9.3%, driven by the strong momentum at the startof the year and depressed activity in 2022. As the one-off
effect from lifting Covid measures wears out, consumption
growth is likely to weaken in 2024.

The outlook for emerging market economies (EMEs) is on
average stronger than that for advanced economies, but it
remains weak by historical standards. We expect GDP
growth to stay in lower gear at 3.9% this year and 3.8% next,
broadly flat with 2022 due to weak external demand andtightening global financing conditions. Under the headline
figure lies substantial heterogeneity. Emerging Asia is set tolead other regions again as China’s economy rebounds from
Covid-19 lockdowns. Latin America, struggling with

China continues to have relatively low and stable inflation.
CPI inflation is expected to only slightly increase to 2.1% in
2023 and 2.6% in 2024, below the central bank’s target rateof 3%. While the supply shock associated with the RussiaUkraine war had driven up energy and food prices, thefeedthrough to domestic inflation in China is still relatively
modest due to its domestically administered pricing
mechanism and its self-sufficiency in coal and food (staple
grains). This means, compared to other EMEs, inflation is lessof a brake on consumers’ purchasing power.

19 | Atradius Economic Outlook – July 2023

We forecast fixed investment growth to pick up to about 6%
in 2023. State-driven investments remain a key force behind
the growth, even though they should gradually wind down
as fiscal policy normalises in the rest of the year and thefiscal impulse turns negative. Offsetting this will be private
investment, which we expect to pick up pace during the year.
A weak spot remains the poor performance of the real estate
sector. Despite a few positive developments, such as a rise in
the amount of completed projects by 15% y-o-y in Q1 2023,
investor sentiment remains weak. The commencement of
new projects remains below par, after a 40% decline in 2022
and another 5% decline in Q1 2023.
Exports, after falling last year, are showing subdued growthin 2023, due to weak demand from key markets and the shift
in global demand from goods back to services. Fiscal policy
support is only making a mildly positive contribution to
growth in 2023. The National People’s Congress in March set
conservative government spending targets, indicating its
trust in a strong consumption recovery. Furthermore, thecongress called for ‘prudent’ monetary policy, andmaintaining stability. However, more targeted measuresdirected at the real estate sector or SOEs could be expected incase of market disturbances.
We expect that India's economy will grow by 5.6% in 2023
and 6.4% in 2024. The growth momentum is likely to fadeafter the first quarter of 2023, weighed down by the
weakening trade environment and a delayed effect of earlier
monetary policy tightening.
Price pressures eased in April, with headline CPI inflation
dropping to 4.7%, from 5.7% in March. Cooling inflation was
broad-based across food, fuel, and all major core categories.
Lower inflation, together with more signs of a slowdown ineconomic activity, were reason for the central bank of India(RBI) to pause rate hikes in April. Policy committee members
are taking a wait-and-see approach to assessing the lagged
impact of monetary tightening since May 2022. We expect
policy rates to stay on hold at the next meeting in June andfor the rest of the year as inflation cools and the economy
loses steam. Consumers are likely to turn more cautious due
to tightened monetary policy and elevated price pressures.
High inflation weighs on real income growth and is likely todrag down consumption growth in 2023.
The manufacturing Purchasing Managers’ Index (PMI)
survey continues to point to expansion, with a reading of
57.2 in April 2023, above the neutral threshold of 50. Despite
positive sentiment, manufacturing production growthcontinues to weaken, which supports the view thatinvestment growth is likely to remain lacklustre. We expect
fixed investment growth to cool to 2.3% in 2023, from 10.5%
in 2022. Furthermore, both exports and imports show weak
dynamics. There is weak demand from India’s major export
markets, the US and EU, which is only partially compensatedfor by higher exports to China. We think the current accountdeficit can narrow slightly in 2023, to 1.3% of GDP, from 2.4%
in 2022.
In the FY2023-24 budget, the government pledged fiscal
prudency, targeting a smaller fiscal deficit of 5.9% of GDP,
down from 6.5% in FY2022-23. Capital expenditure onenergy and infrastructure is set to receive a boost, whichshould support private investment, though the effects will
only be felt over the medium term. While we believe that the
government’s budget deficit target is ambitious, we do think
the pledge of government consolidation is strong and will
succeed in narrowing the deficit somewhat in the coming
years. This is crucial for reducing government debt, which
we estimate to reach 86% of GDP at the end of 2023.

Latin America: Brazil and Mexico
After a surprisingly robust performance since the pandemic,
we project Brazil's GDP growth to fall from 3.0% in 2022 to1.8% in 2023 and to moderate further to 1.0% in 2024. The
economy is steadily slowing down as the lagged effects ofhigh interest rates increasingly weigh on demand. Brazil’s
central bank was one of the first to begin its post-crisis
monetary tightening cycle, increasing interest rates from 2%
in March 2021 to 13.75% in August 2022, the highest in theregion. Lower external demand and policy uncertainty,
which keeps inflation expectations elevated and will delay
the start of the monetary policy-easing cycle (which we now
expect by year-end 2023), are also weighing on Brazil’s
growth outlook. Policy uncertainty stems from the change ingovernment at the start of 2023 after the left-oriented former
president, Lula da Silva, narrowly won the presidential
election against the right-wing populist, Jair Bolsonaro.
Economic policy will be more state-driven with higher social
spending. This raised concerns about the credibility andfuture of the spending cap, an important anchor for publicfinances. Political pressure on the central bank to cut interest
rates added to policy uncertainty. This policy uncertainty
contributes to higher inflation expectations which will delay
the start of the monetary policy easing cycle to Q4 2023.
We expect macroeconomic policy to stay broadly orthodox
and the central bank to remain independent, as pragmatism
and a minority position in Congress will limit the risk ofradical policies. Proposals for a new much-needed fiscal
framework have just been passed by the lower house and are
awaiting approval by the Senate. Additionally, the central
bank has kept interest rates unchanged so far and although
it acknowledged the proposals it also indicated that aninterest rate cut is not imminent. Both the proposals andcentral bank actions largely reassured investors. The
sovereign CDS price has fallen from 250 bps end-March to
183 bps mid-June. The real is among the world's strongest
currencies this year and has appreciated by over 9% vis-a-vis
the USD, illustrating Brazil’s resilience. Nevertheless, to put
government debt (73% of GDP in April 2023) on a firm
downward trajectory, the new rules need to becomplemented with tax reforms to lift tax revenues expected to be sent to Congress later this year. And as
always, the proof of the pudding will be in the eating. As theeffects of policy uncertainty and high interest rates will only
slowly fade, we expect a further moderation of GDP growthin 2024. A normalisation of agricultural output and weak
investment demand will outweigh positive effects fromrising consumer demand on the back of falling inflation andimproving global demand.
Atradius Economic Outlook – July 2023 | 20

After one of the slowest and still incomplete recoveries fromthe pandemic, we project Mexico's real GDP growth to
weaken from 3.0% in 2022 to 1.8% in 2023 and further to 1.0%
in 2024. This is largely due to Mexico’s close economic ties tothe US. The US economy continues to lose momentum which
will curtail Mexican exports and remittance inflows.
Moreover, domestic policymaking is straining its economic
growth outlook. The lack of fiscal support during the
pandemic will leave lasting scars on Mexico's economy suchas permanent business closures and lower quality jobs.
Furthermore, business-unfriendly policies under President
López Obrador, in power since December 2018, will continue
to curtail private investment. Finally, still elevated inflationand the lagged effects of monetary policy tightening will
restrain domestic consumer demand and business
investment. Consumer price inflation peaked at 8.7% inAugust and September 2022 following Russia's invasion of
Ukraine and a severe drought in Northern Mexico raised,both contributing to higher food and energy prices. In
response, the central bank lifted interest rates from 4% inJune 2021 to 11.25% in March 2023. Although inflationarypressures have eased to 5.8% in May, they remain well above
the 2%-% to 4% target range of the central bank. Also, core
inflation (excluding food and energy), remained elevated at
7.4% in May 2023. And with wage increases in the
manufacturing sector being relatively high as well, we
expect the central bank to remain very cautious. It also may
take until 2024 the last quarter of 2023 before it starts aneasing cycle. Combined with ongoing state intervention in
the energy sector, this will continue to drag on the economy
in 2024.

Eastern Europe: Russia and Turkey
We forecast that Russia’s economy will grow by 0.7% in
2023, which is 2.7 percentage points higher compared to six
months ago. Despite Western sanctions, Russia is still able toexport large amounts of oil, which underpins economic
growth. For 2024, we expect 1.7% growth.
There is still little clarity on the extent of Russia's oil output
cut. The government announced it would cut production by
500,000 barrels per day in March in response to the EU
embargo and oil price cap, but it remains unclear whether
the full production cut has been implemented. The IEA
estimates that Russian crude production fell by only
200,000 barrels per day in April compared to the Februarybaseline. Other data show that Russian seaborne oil exports
have been increasing gradually since the trough in
December.
The Russian rouble quickly recovered after the first weeks of
the war, due to the imposition of capital controls, the forced
conversion of European payments for gas into roubles andstrong import decreases. This year we see a gradualdepreciation of the rouble due to FDI outflows, though thecentral bank has taken measures to prevent a sudden
outflow of too much FX. Inflation decreased considerably inrecent months, declining to 2.5% in May 2023. This compares

21 | Atradius Economic Outlook – July 2023

to 11.8% at the start of the year, due to high base effects from2022 and weak domestic demand.
We still expect 2.2% consumption growth in 2023, but muchdepends on the government’s mobilisation plans. The
adoption in April of new army draft legislation rekindledexpectations of another wave of mobilisation. The central
bank has reported a pick-up of household lending, which canprovide a stimulus to consumer demand in Q2. Later in theyear, when we expect some additional mobilisation,
consumer demand growth is likely to wear off. Whether
there will be additional mobilisation or not, people’s
propensity to save will remain elevated. The labour market
is also expected to remain tight. The unemployment rate
declined from 4.1% at the start of the war, to 3.3% in April thisyear.
The central bank of Russia cut the policy rate several times
since the start of the war (when it sharply hiked the rate to20%). Since September 2022, the policy rate was kept at 7.5%,
although the central bank signalled that it might consider
rises in the coming months depending on inflation
dynamics. The federal government budget posted a sizeable
deficit in April. Though they have come under pressure in
recent months, oil and gas exports still bring in large
revenues for the government budget. At the same time,
expenditures rise as the government allocates more funds tothe war in Ukraine. According to our estimates, the 2023
budget is on track to record a 3% deficit, followed by a 1.3%
deficit in 2024.
In Turkey, in the second round of the presidential elections
held on May 28, Recep Tayyip Erdogan was re-elected aspresident with 52.2% of the vote. The parliamentary elections
held two weeks before resulted in Erdogan’s AKP party
remaining the largest party in parliament with 35.5% of thevote, though it did lose compared to the previous elections. In
the aftermath of the elections, the lira fell by 2.3% to a newrecord low of 20.45 against the USD. The lira's decline ispartly good news, as it shows a willingness by the authorities
to bring the currency more in line with its underlying value.
In recent years, attempts have been made to artificially prop
up the lira's exchange rate through capital controls and FX
interventions.
Economic activity is constrained by high inflation and aweak lira, weighing on consumer purchasing power.
Moreover, global monetary tightening and a subdued
external environment, which will constrain the external
sector, will slow the pace of economic activity. We expect
GDP growth of 2.1% in 2023, against 5.6% last year.
February’s earthquake has hit production in Turkey’s
southern and central regions. Despite the near term impact
on GDP growth - the affected regions account for 9.3% of
Turkey’s GDP – we think that reconstruction efforts arelikely to bring back economic activity relatively quickly.
Inflation slowed down for the sixth consecutive month to
44% in April, from 51% in March, owing to a supportive baseeffect and a round of electricity and natural gas price cuts.
The pace of inflation will now likely stabilise at about 40%
for the rest of the year. There is still a strong pass-through on
inflation from a weakening lira. The lira lost one fifth of its

value in the past year as monetary policy remains very
accommodative, with several interest rate cuts. Internal andexternal imbalances, unorthodox domestic policies, andrecent policy tightening in the US and the eurozone continue
to weigh on the lira in 2023.
Over the past couple of months, the central bank kept thepolicy rate constant at 8.5%. Given the high rate of inflation,
this causes the real interest rates to be sharply negative andmonetary policy to be far too accommodative. Net reserves(gross reserves adjusted for FX liabilities) of the central bankdeclined from USD 26 billion in January to around zero inMay, leaving almost no space for the central bank to makedirect interventions in the FX market.
Another vulnerability of Turkey’s economy is its weakexternal position, characterised by structural current
account deficits and high external debt. The current accountdeficit is forecast to be 4% in 2023, which is lower than in
2022 (5.7%), but still very high. The external debt stock isestimated to reach 52% of GDP in 2023. Short-term external
debt repayments and the current account deficit are leading
to high external financing needs.
We think that the current economic trajectory in Turkey isunsustainable. A change in direction of policy is needed tobring back confidence from financial markets. This includes
a return to more conventional policy to get inflation undercontrol and to reduce external imbalances. Two recent
appointments by the Erdogan government – Mehmet Simsek
as finance minister and Hafize Gaye Erkan as head of thecentral bank – are reassuring in this regard, as both aresupporters of more rational economic policies.

Sub-Saharan Africa: South Africa
We predict that growth in South Africa will slow to 0.2% in
2023, on a weak global backdrop and serious domestic
constraints. The unprecedented scale of power outages
means that the economy is unable to produce any
meaningful growth in the near term. Rising loan costs,

tougher credit conditions and sky-high unemployment willsqueeze household disposable income in 2023, heightening
the risk of strikes and social discontent, although ebbing
inflation will relieve some of the pressure. We forecast
growth to recover modestly in 2024, to 1.0%, aided by aglobal uptick and an improvement in power supplies, led by
new private-sector renewable energy projects.
Headline inflation has been on a downward trajectory inrecent months. In May 2023, inflation was equal to 6.3%.
Over the coming months, we expect to see further
disinflation, helped by slack aggregate demand, spareindustrial capacity, strong retail competition and risinginterest rates. Our forecast sees inflation moving closer to the
midpoint of the central bank’s target rate (3%-6%). The
central bank has raised the policy rate by 125 basis points to
8.25% since the start of the year. We expect that it is nearing
the end of the monetary tightening cycle.
On the fiscal side, we estimate the budget deficit to equal 5.1%
of GDP in 2023, with similar readings expected in the
coming years. The budget for fiscal year 2023/24 underlines
an improvement in revenue –restructuring at the South
African Revenue Service (the tax agency) – and a cautious
approach to spending. Fiscal consolidation is needed in themedium term, given the structurally high deficit, and thevery rapid increase in the government debt level in recent
years.
Looking forward, South Africa faces a variety ofuncertainties. Structural economic risks include highunemployment, power supply constraints and logistics
bottlenecks. Infighting in the ruling party, the African
National Congress (ANC), and low confidence in the ANC andPresident creates further uncertainty within the country,
especially in course to the elections in 2024. Other threats
are climate-related, such as more intense droughts andfloods, alongside water shortages, which would stifle growth
in multiple sectors.

Atradius Economic Outlook – July 2023 | 22

Appendix: macroeconomic forecasts – major markets
GDP growth(% change p.a.)

Inflation(% change p.a.)

Budget balance(% of GDP)

Gross government
debt (% of GDP)

Current account(% of GDP)

Export growth(% change p.a.)

Private cons.
(% change p.a.)

Fixed
investment(% change p.a.)

Government
consumption(% change p.a.)

Retail sales(% change p.a.)Industrial prod.
(% change p.a.)2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024
Australia

3.7

1.6

1.6

6.6

5.9

3.2

-0.7

0.9

-2.4

56.3

1.1

2.5

0.4

3.4

8.5

6.6

6.5

1.8

1.8

1.1

2.1

2.7

5.1

-0.4

-2.0

5.4

-0.9

1.5

0.6

2.6

Austria

4.9

0.5

0.8

8.5

7.2

1.1

-3.2

-2.8

-1.0 112.0 108.8 108.7

55.9

53.3

0.7

1.9

2.4

13.0

2.4

1.4

4.9

-1.2

1.9

0.4

1.1

0.3

3.6

0.3

0.5

-0.8

-1.1

3.5

7.5

-0.6 -0.4

1.2

-3.8

Belgium

3.2

1.3

1.0

9.6

4.1

1.8

-3.9

-3.3 125.5 121.5 122.9 -3.6

-1.5

-0.9

5.1

-0.6

1.2

4.1

2.5

1.7

-0.8

2.6

-0.7

3.2

0.7

0.6

-3.8 -4.0

2.5

-0.7

-3.9

-1.5

Brazil

3.0

1.8

1.0

9.3

5.0

4.2

-4.5 -7.9-7.7

80.3 -3.0

-1.5

-3.5

5.9

5.7

-0.2

4.3

1.1

0.2

0.8

-4.6

1.7

1.5

1.7

2.0

1.0

2.7

1.6

-0.7

1.0

3.5

Canada

3.4

0.6

0.5

6.8

3.7

2.2

-0.3

-1.8

-3.8 111.7 114.3 115.2 -0.3

-1.9

-2.4

2.8

3.7

0.8

4.8

1.6

0.6

-1.5

-3.0

1.0

2.0

0.0

-0.3

1.8

0.7

0.6

3.8

0.1

1.4

China

3.0

5.5

4.6

2.0

1.4

2.4

-7.3

-6.7

-6.1

51.8

55.6

58.6

2.2

2.2

0.6

-0.3

0.3

0.7

0.1

9.3

5.0

3.3

5.9

4.3

9.0

4.3

1.7

0.3

9.6

5.2

3.8

5.5

4.7

Denmark

3.8

1.3

2.2

7.7

3.7

1.6

3.3

2.0

1.0

49.7

42.4

39.9 13.0

11.8

12.2

8.6

3.9

1.1

-2.3

0.3

2.7

8.6

-5.9

2.8

-3.5

-1.3

1.8

-4.7

-2.3

1.2

15.1

7.3

2.3

Finland

2.1

-0.2

1.0

7.1

6.1

1.7

-0.8

-2.0

-2.3

73.4

72.5

73.4

-3.0

-2.5

1.7

0.1

2.5

2.0

0.0

1.4

5.0

-4.4

2.2

2.9

2.8

0.2

-3.6

-1.4

1.9

4.1

-0.2

0.3

France

2.5

0.5

0.8

5.2

5.2

1.9

-4.7

-5.0

-5.0 125.1 122.9 126.0 -2.1 -0.8

-1.8

7.2

1.0

3.4

2.2

0.1

1.2

2.3

-0.4

0.2

2.5

1.0

1.6

3.2

-2.8

-1.1

-0.1

0.1

1.1

Germany

1.9

-0.4

1.2

6.9

5.2

0.2

-2.7

-2.3

-1.8

4.3

6.1

5.6

3.5

1.0

2.5

4.9

-0.9

3.0

0.5

1.1

2.3

1.2

-4.6

0.8

-0.6 -2.9

3.6

-0.5

0.8

1.4

4.9

2.0

72.9

61.3

76.4

60.8

61.5

-3.9

Greece

6.0

1.3

1.0

9.6

3.6

2.1

-2.4

-1.4

-1.3 215.1 204.2 199.9 -9.6

-3.8

-3.7

6.2

2.2

7.9

2.6

0.3

11.6

5.0

5.1

-1.5

2.7

1.0

3.0

-1.1

1.2

2.2

0.7

Hong Kong

-3.5

4.4

2.5

1.9

2.5

2.7

-8.0

-3.3

-1.9

2.7

3.6

4.4

10.7

4.5

4.6 -12.6 -3.4

8.3

-1.2

8.0

2.4

-7.7

7.3

3.3

8.2

-2.4

1.5

-3.3 25.4

7.9

0.2

0.1

1.2

India

6.7

5.6

6.4

6.7

5.4

4.5

-6.9

-6.7

-5.5

82.6 84.4

81.7-2.4 -0.8

-1.5

6.5

10.3

6.4

5.9

2.7

4.1

6.4

9.7

7.9

4.6

1.7

3.8

Ireland

12.1

0.5

4.4

7.8

4.4

0.8

1.6

1.8

1.2

36.5

30.5

8.9

Italy

3.8

1.2

0.9

8.2

5.9

1.8

-8.0

-4.9 -3.2 170.1 162.7 163.3 -1.3

Japan

1.0

0.8

0.7

2.5

2.8

0.9

-6.2

-5.6

-4.5 #### 241.7 243.2

Luxembourg

1.6

0.7

2.8

8.2

3.2

1.7

1.0

0.6

0.8

21.6

20.7

19.5

Netherlands

4.5

0.7

1.4

10.0

4.2

2.0

0.1

-3.0

-2.4

64.6

63.0

63.3

4.4

New Zealand

2.2

-0.6

2.9

7.2

5.2

1.7

-5.3

-3.1

-0.9 45.5

47.5

46.1

-8.6 -5.9 -4.0

13.5

7.2

41.4

37.4

30.3 16.8 18.0

4.3

0.1

8.1

1.8

3.3

13.0 14.2 15.2

1.5

2.6

6.8

3.9

1.3

26.3 -23.6

2.1

0.7

0.6

1.9

1.9

1.8

3.4

17.7

-0.1

2.6

2.4

1.5

10.2

1.6

3.3

4.6

0.9

0.4

9.7

2.0

1.1

0.0

1.0

-0.5

0.3

-1.7

2.2

0.4

-0.7

3.7

1.9

1.9

2.2

5.1

-0.6

1.4

2.0

1.6

0.9

-1.0

2.3

1.5

1.5

0.1

-1.1

-0.2

3.2

0.8

0.1

-0.9

1.8

5.0

3.1

5.9

-0.6

2.4

4.3

2.8

0.9

1.4

-1.1

0.7

2.3

4.1

-0.8

-0.7

2.6

-2.3

8.6

-1.2

-2.0

4.8

6.0

7.3

4.7

0.8

2.3

6.5

1.9

1.3

2.5

1.9

-0.4

1.6

2.6

1.5

0.6

-1.9

1.3

2.4

-4.7

1.5

-0.7 18.6

7.3

2.8

-2.0

2.5

3.6

-7.6

2.6

4.5

-0.9

1.6

-0.3

0.7

3.6

-1.3

1.4

2.6
3.7

Norway

3.2

1.3

0.8

5.8

5.1

2.6

27.3

5.5

4.4

1.8

7.0

-0.1

1.1

4.3

1.3

1.5

0.0

1.9

0.7

-5.4

-3.0

2.2

2.6

-5.3

Portugal

6.7

2.7

1.5

7.8

4.6

2.5

-0.3 -0.4-0.3 135.1 123.5 118.6 -1.4

1.3

0.3

16.6

7.7

0.3

5.8

1.0

1.0

3.1

1.9

4.6

1.7

0.9

1.2

4.8

1.1

-0.5

0.3

-2.3

2.1

Russia

-2.1

0.5

1.6

13.8

4.8

4.3

-1.1

-1.0

14.8

3.6

3.6

-13.9

1.3

3.4

-1.4

2.2

1.9

3.3

2.5

2.4

2.8

7.2

1.1

-6.1

-3.1

1.9

-0.3

0.2

0.0

Singapore

3.6

0.4

2.3

6.1

4.0

1.8

-1.0

-0.5

0.4

167.8 172.1 156.7 19.3 15.6 13.4

-1.3

-1.5

2.0

9.7

1.8

3.6

1.6

0.9

5.4

-2.3

4.1

1.3

7.1

-5.6

4.2

2.8

-4.9

4.8

Spain

5.5

2.3

1.3

8.4

3.2

2.2

-4.8

-4.3

-3.1 137.6 133.6 133.7

0.6

2.4

1.7

14.4

4.6

0.9

4.4

0.8

2.2

4.6

-0.7

2.1

-0.7

1.2

1.1

0.9

4.9

1.2

2.8

0.9

0.7

South Africa

1.9

0.2

1.0

6.9

6.1

5.1

-4.9

-5.1

-4.7

-0.5 -2.9

-1.8

7.4

1.7

1.9

2.5

0.5

0.4

4.8

3.3

1.9

1.0

0.8

0.1

1.8

0.5

0.7

-2.4

0.9

2.3

-2.9

35.7

33.9

16.1

71.1

16.5

18.3 10.9

75.9

78.4

South Korea

2.6

0.5

1.8

5.1

3.3

1.5

-3.0

-2.0

-0.2 47.9

51.2

50.4

1.7

1.4

2.9

3.4

-3.6

0.2

4.1

1.8

1.1

-0.5

-1.7

2.5

4.0

2.2

0.4

-0.3

2.5

3.0

1.3

-5.8

6.0

Sweden

2.9

-0.3

0.7

8.4

8.1

2.6

0.8

-1.5 -0.4 44.4

43.4

42.7

4.7

4.4

3.9

7.1

2.8

1.5

2.0

-2.4

1.3

6.2

0.0

0.5

0.1

1.9

2.0

-2.1

-5.1

3.3

1.9

-0.4

1.5

Switzerland

2.1

0.3

1.5

2.8

2.4

1.5

1.0

0.0

0.0

25.8

25.2

24.4

9.3

6.8

7.4

5.9

0.9

2.5

4.0

1.5

1.0

-0.3

1.3

1.1

0.1

-0.5 -0.8

-1.3

-1.8

1.1

7.6

1.9

1.3

Turkey

5.6

2.1

1.5

72.3 46.5 41.9 -0.5 -4.9 -3.2

26.9

29.0

24.9

-5.7

-4.3 -1.8

9.1

-0.9

4.2

19.6

6.0

-4.8

2.8

3.5

-1.8

5.2

2.7

-1.3 10.3

9.0

-4.8

6.2

0.3

2.3

United Kingdom

4.1

0.4

0.8

9.1

7.1

2.9

-5.2

-6.5

-6.0 101.0 101.4 104.2 -3.8

-2.6

-3.2

9.9

-3.0

2.4

5.3

-0.1

0.4

8.6

-0.1

-1.3

1.8

0.2

2.1

-3.7

-1.5

1.0

-2.8

-1.0

1.1

United States

2.1

1.3

0.4

8.0

4.4

2.9

-4.5 -6.7-6.3 144.6 144.8 147.1 -3.7

-3.0

-3.0

7.1

1.2

3.0

2.7

1.9

0.5

-0.5 -0.3

1.3

-0.2

1.5

-1.9

0.2

0.9

0.7

3.4

-1.0

-1.0

Eurozone

3.5

0.6

1.2

8.4

5.2

1.3

-3.6

-2.7

2.2

2.0

7.4

1.3

2.4

4.5

0.3

1.7

3.8

1.3

1.4

-0.4

0.9

0.9

-1.6

1.5

2.2

-0.3

1.8

-3.3

-

-

-

-1.1

-0.2

Sources: Oxford Economics, Atradius

23 | Atradius Economic Outlook – July 2023

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