Page 9 - Turkinsurance Digital Magazine

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The Global Economy Will Grow by 1.5 Percent in 2023

period. In the report, global inflation is expected to average 5.3
percent in 2023, after falling from about 8 percent in 2022.
According to the report, Eurozone inflation will peak at 10 per-
cent in the last quarter of 2022 and then average 5.6 percent in
2023. While it is estimated that inflation in the US may have
already peaked, it is predicted that inflation, which will contin-
ue to hover above 4 percent until the first quarter of 2023, will
fall below 2 percent after the third quarter of 2023. According
to the report, the determination of central banks to fight infla-
tion may cause short-term public interest rates to rise above
the neutral level, including 4 percent in the United States and
2.25 percent in the Euro Zone. Both the Fed and the ECB will
Allianz Trade has published the “Global Economic Outlook” remain more hawkish compared to other recessionary periods
report for the fall period 2022 - 2023. According to the re- and will only start limited rate cuts after the middle of 2023.
port, the energy crisis and rising interest rates will push global In the report, recession concerns are expected to permanently
GDP growth to 1.5 percent in 2023. Allianz Trade shared its horizontal yield curves by the end of the year. The report states
“Global Economic Outlook” report for the fall period of 2022 – that corporate risk has increased again, but higher financial
2023, which includes forecasts for the third quarter. The report support will prevent a large wave of commercial insolvency and
predicts that global growth, after contracting by 0.6 percent aggravation of negativities. On the other hand, low demand,
in the second quarter of 2022, will turn negative in the fourth increasing financing problems and long-term production con-
quarter and will not recover before the middle of 2023. In Alli- straints such as input prices, labor shortages and supply chain
anz Trade’s report, the global growth forecast was lowered by problems mechanically raise expectations, especially in com-
1 percentage point to 1.5 percent compared to the second quar- mercial bankruptcies. For the Eurozone as a whole, bankrupt-
ter estimates. According to the report, which states that global cies are expected to increase by more than 40 percent.
macroeconomic conditions have deteriorated significantly since
June, the negative impact on business confidence, combined Corporate credit margins, on the other hand, will expand, albeit
with deep and prolonged breaks in energy markets, will push to a limited extent, but will contract slightly next year. High
the manufacturing sector into recession in most countries. negative real rates facilitate higher budget deficit spending to
soften the impact of the cost of living crisis on consumers and
The report states that growth in the Eurozone in 2023 may firms, while it is stated that countries will become more indebt-
slow down to 0.8 percent due to rising energy prices and low ed for periods when interest rates will rise. Therefore, the risk
confidence. The report states that growth in the Eurozone in of a potentially painful financial correction at the end of next
2023 may slow down to 0.8 percent due to rising energy pric- year is expected to increase.
es and low confidence. While predicted that this would hinder
consumption and investment, on average, increasing at a rate The danger of risk to the financial balance in
of 2.5 percent of GDP in 2023 and limited financial support developing countries
of monetary easing since the middle of the year, the recession
shorter and shallower to make will help limit the risks of social According to the data contained in the report, some Developing
unrest. On the other hand, it is estimated that the increase in Countries (DC) are facing the risk of a balance of payments
financial support will not fully compensate for the shock on real crisis. In addition to Turkey, the risks to the financial balance in
disposable income and company margins. Argentina, Chile, Colombia, Egypt, Hungary, Kenya, Pakistan,
Poland and Romania are already at dangerous levels. But for
According to the report, rapidly rising interest rates and falling these countries, there is still room for further increases in yields
real disposable incomes will cause a housing recession in the and purchase-sale differences. Even if the global economy is
United States. In addition to the tightening monetary and finan- able to avoid a deeper recession, conditions in developing coun-
cial conditions, as well as a negative external conjuncture and tries are not expected to improve until late next year. Ahmet
reduced financial support after the midterm elections, the USA Ali Bugay, CEO of Allianz Trade Turkey, who evaluates the
will record a 0.7 percent decline in GDP. China’s economic re- economic forecasts of DC said: “The direction of the outlook
covery is expected to be difficult after a very low growth level in will depend significantly on the impact of financial tightening in
2022, while growth forecasts have been lowered to 2.9 percent major economies and the effectiveness of financial support. We
in 2022 and 4.5 percent in 2023. The report also predicts that see more downside risk in equity valuations until markets re-
further geopolitical tensions, such as the escalating US-China cover next year and offer single-digit returns. Due to problems
conflict and Europe’s response to the energy crisis, will add such as rising import bills, weak global demand, zero Covid
tailwind to current divergence trends. Global trade growth in policy in China, real estate crisis, geopolitical disputes, current
volume is projected to remain low at 1.2 percent in 2023 as ad- account balances will be disrupted in all DC, except for energy
vanced economies face a recession driven by domestic demand. exporters. There will be no support from the Capital/Finance
account item to relieve this situation. Negative investor senti-
Inflation is expected to remain high until the first quarter of ment and rising interest rates in advanced economies are en-
2023 as energy prices peak, while food and services inflation is couraging capital outflows and a strong US dollar in the form
also forecast to fuel upward pressure on prices over the same of an escape to safety.” .