Dutch GDP contracted by 0.7% q/q in Q1 2023, after +0.4% q/q in Q4 2022 (revised by 0.2 percentage points to the downside). There are several drivers to this contraction observed in Q1.
There were slight signs of recovery in real estate and construction activity following the lifting of health restrictions in December 2022 and thanks to support measures taken by the authorities. However, hopes for sustainable improvement in the property sector soon fell.
The normalisation of the Bank of England’s (BoE) monetary policy, which began in December 2021, helped increase the cost of mortgages to households: it rose from an average of 1.5% in November 2021 to 4.4% in March 2023.
Biodiversity loss, soil moisture reduction, food insecurity, migration increase: report after report, the IPCC (Intergovernmental Panel on Climate Change) warns of the consequences of global warming and the need to keep it within the sustainable limit of 1.5°C to 2°C compared to the pre-industrial era.
The current inflationary momentum could encourage the BoJ to reassess its yield curve control policy, or even start a tightening in monetary policy. However, the timing and size of any such adjustments are difficult to predict and may not occur before next year.
Kenya's external solvency has been deteriorating for several months. After years of indebtedness to international markets and China, external public debt service rose significantly, accounting for 22% of export receipts in 2022. In addition, drought in the country has increased its dependence on imports, and the terms of trade have deteriorated significantly since the start of the war in Ukraine. On top of that are the dynamics of global monetary tightening.
In March 2023, the M2 measure of money supply contracted for the fifth consecutive month in the United States (-4.5% over one year).
In an interview with the press in 2021, the President of the European Commission, Ursula Von Der Leyen, stated that "growth and CO2 emissions [were] not necessarily linked", citing the European Union (EU) as an example. Since 1990, the EU has in fact reduced its greenhouse gas emissions by 25% while increasing its gross domestic product (GDP) by 60%. Although this is true at the level of the EU-27, it is hardly transposable on a global scale.
Evidence of falling housing prices remains patchy. After a sustained rise throughout 2021, residential housing prices in the main European countries continued to resist the tightening of credit conditions in the fourth quarter 2022, with the notable exception of Sweden and Germany. A generalisation of real estate price declines in 2023 is a significant possibility.
Trade integration with China (including Hong Kong and Macau) has changed tremendously over the past 20 years. In 2022, bilateral trade amounted to some USD 150 bn – a 37-fold increase relative to trade in 2001. Since 2009, China has been Brazil’s main trading partner absorbing today close to 27% of its exports (vs 11% for the US).
By cutting out Russian hydrocarbons, the EU has accelerated its shift towards renewable energy.
The interest rate on new home loans for eurozone households rose by an unprecedented 177 basis points (bps) year-on-year in January 2023. It stood at 3.1% this past January compared with 1.3% in September 2021, its lowest level ever.
The European Commission survey of consumer confidence has found, over the past four months, a marked improvement amongst German consumers, driven by an upturn in their expectations for the general economic situation. Conversely, French consumer confidence remains depressed and is still not showing any sign of improvement. Assessments of the past situation are also diverging, with that in Germany also improving, albeit to a lesser extent.
On 22 February, the South African National Treasury set out its budget plan ahead of the new fiscal year, which will start on 1 April. After slightly revising its fiscal balance upwards since October 2022, the Treasury now expects a primary surplus starting from the current fiscal year. This performance should gradually improve over the next three years.
Polluting has never been so expensive. Since mid-February 2023, CO2 permits have been trading at more than €100 per ton in the European Union for the first time since the European Union Emissions Trading System (EU ETS) was created in 2005.
Business bankruptcies in the European Union increased significantly in the fourth quarter 2022, reaching their highest level since 2015 according to figures published by Eurostat on Friday 17 February. The overall dynamics conceal large sectoral differences.
While goods disinflation is expected to increase, or even turn into deflation in the coming months, services inflation is expected to show more inertia (due in particular to the shelter component), slowing the overall decline in inflation.
Tunisia is raising concern. The CDS premium on 5-year sovereign bonds has risen from less than 730 basis points (bps) at the end of November to 1072 bps currently. At this level, the country is joining the category of emerging issuers considered to be close to default by investors. There are many reasons for this.
With the war in UKraine, the European Union (EU) has had to find alternative sources of energy supply in emergency and at a significant cost.
The drawdowns of depository institutions from the US Federal Reserve’s (Fed) discount window have intensified over the past year. Their outstandings amounted to USD 4.6 bn on 18 January, certainly far from the USD 110 billion borrowed at the height of the 2008 financial crisis, but well above the USD 360 million borrowed on average for 15 years.
In France, business insolvencies reached 41,020 units in 2022, according to the provisional estimate of the Banque de France. Over the year as a whole, they were up sharply compared to 2021 (+49%) but remained 20% below their 2019 level.
On 1 January 2023, Croatia became the eurozone’s twentieth member. By reducing foreign exchange risk, euro adoption significantly improves the country’s macroeconomic solidity.
From Adam Smith to the present day, nations' wealth has been built on fossil fuels. Coal, oil and gas have become a vital part of our lifestyles. In 2022, they still account for 83% of the world’s primary mix, that is to say what essentially feeds economic activity.
In 2021, 28% of housing loans made by French banks to individuals were guaranteed by mortgage. This tangible security consists of assigning the real estate asset financed as collateral to the lender, in order to offset the consequences of default by the borrower where these are not covered by any borrower’s insurance against death, incapacity or invalidity.
The construction output index is defying the most pessimistic outlook. In October, it reached its best level since January 2021, up 1.1% month-on-month and 2.6% year-on-year, while new orders are eroding. However, the cumulative order books (8.7 months according to INSEE, close to the historical level of 9 months) remain substantial and their implementation is lagging behind.
Weekly charts highlighting points of interest in the world economy
