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.
Over the past few months, the equity markets of the main emerging financial centres have shown a little more optimism. They are betting on a recovery in growth in China after the lifting of health restrictions, on the positive effect of the drop in commodity prices for importing countries and on the impact of US monetary tightening and the appreciation of the dollar to be less severe than expected. The first two arguments are uncertain and must be put into perspective. The financial shock is probably behind us. But its negative impact on investment will continue this year. Likewise, the acceleration of inflation in 2022 could have diffuse effects on household consumption, even if wages were to catch up.
The sudden and ill-prepared abandonment of the zero-Covid policy at the start of December 2022 has plunged China into further turbulence. The large epidemic wave has hindered production in the manufacturing sector and again delayed the recovery in private consumption and activity in the services sector. However, assuming that the pandemic starts to ease off in February 2023, domestic demand should finally rebound, helped by additional monetary and fiscal support measures. On the other hand, exports are likely to remain affected by the weakness in global demand. While the current account surplus should narrow in 2023, how capital flows will develop is more uncertain.
The Indian economy coped well with the external environment in 2022, but slowed down mainly because of inflationary pressures. Over the fiscal year which will end in March 2023, the budget deficit could exceed the initial target, but the overrun should be marginal and the debt-to-GDP ratio should continue to fall. The government’s refinancing risks remain contained. On the other hand, the tensions on external accounts are likely to remain relatively strong, mainly as a result of the fall in exports in an unfavourable international context. Nonetheless, the central bank should be able to contain the depreciation of the rupee. While foreign exchange reserves have fallen significantly, they are still sufficient to cover the country’s external financing needs.
Malaysia’s economy held up well in 2022. Economic growth may have exceeded 8% and public finances strengthened thanks to the sharp rise in oil revenues. Furthermore, although external accounts weakened due to capital outflows and increased imports, the current account balance remained in surplus and the ringgit depreciated moderately against the dollar over the year as a whole. The outlook for 2023 is less favourable. Economic growth is expected to decelerate given the monetary tightening and the global economic slowdown. Public finance risks are still contained even though debt remains above pre-crisis levels. The new government should present its 2023 budget in parliament at the end of February. Its budgetary strategy should be in line with that of the previous government
The government of the Philippines maintained health restrictions linked to the pandemic for longer than the average period in emerging countries, with some regions still under lockdown until April 2022. The rebound in activity is not yet finished, and the strength of consumer spending, still supported by remittances, should help to offset the effects of higher inflation and the slowdown in global growth. Economic growth is expected to slow in 2023, but should remain solid. However, the after-effects from the crisis and health measures are weighing on the medium-term outlook.
Vietnam benefited from a solid recovery in its economic growth in 2022, supported by the dynamism of both the export sector and domestic demand. However, the country has also become increasingly vulnerable to the deterioration of the international environment. Exports fell in Q4 2022 and these difficulties are expected to persist in the short term. Inflation accelerated in 2022, the dong depreciated under the effect of US monetary tightening and capital outflows, and the Central Bank began to increase its policy rates. In addition, there was a confidence shock caused by reports of fraud in the local bond market. Against this backdrop, liquidity tensions emerged in the financial sector
Türkiye has enjoyed a period of financial calm since mid-2022 with exchange rate stability relative to the first half of the year, lower risk premiums and bond yields. Growth stagnated in Q3 2022, but monthly inflation slowed and the economic indicators available for Q4 2022 continued to be positive. For 2023, a slowdown is inevitable given the weaker levels of activity expected from the country’s main trading partners. But domestic demand could mitigate the external shock and the fall in oil prices should help to reduce the current account deficit. However, it is still too early to draw any conclusions about the success of economic policy combining fiscal support, monetary easing, and measures to channel the growth of credit and to encourage liraization.
Economic activity weakened in the third quarter. The outlook remains gloomy in the short term. Last September, the central bank ended its monetary tightening cycle in the face of downside risks to growth. This policy is currently not very consistent with the trajectory of inflation. Meanwhile, fiscal policy was tightened in the second half of the year due to the marked deterioration in budget deficit. The EU’s freezing of funds in 2022, depriving the Hungarian authorities of a source of income, has probably weighed on their decision. While this recalibration limits support for growth, it strengthens the credibility of Hungary’s fiscal policy.
GDP growth was resilient in the first three quarters of 2022 but is expected to slow down significantly in 2023. Inflation will be a key feature to monitor as price stability is one of the economic convergence criteria for Bulgaria’s future entry into the Eurozone in 2024. Another point of concern is that the political scene continues to be subject to uncertainty given the many changes in the government over the past 20 months. Investment has suffered as a result of this situation. However, the commitment of the authorities towards reforms does not appear to have been affected.
Israeli economic performance was particularly strong in 2022 and remained above OECD average. Growth was very buoyant thanks to the dynamism of consumption and investment, while the fiscal year should end with a surplus. Although relatively moderate, inflation accelerated during 2022 and forced the Central Bank to tighten significantly its monetary policy. Against this backdrop, which is not favourable to consumption and investment, activity should slow this year. The continued depreciation of the shekel was an additional inflationary factor. The fall in the exchange rate against the USD reflects the general strengthening of the dollar, but also Israeli investors' management of their assets in dollars. External accounts remain solid, thanks to strong competitiveness in some key sectors
Luiz Inacio Lula da Silva started his third term as President of Brazil amidst a tense socio-political climate and more benign economic environment. Despite the many obstacles lying ahead of him, Lula bolsters ambitious social and environmental objectives. Their realisation will rely, amongst other, on an increase in public spending and a more interventionist credit policy. In the absence of a credible redefinition of the fiscal framework, market participants and the Central Bank fear that the use of these policies will come at the expense of greater macroeconomic imbalances.
Chile is unlikely to escape a recession in 2023. The slowdown in global demand will weigh on exports, while domestic demand continues to be eroded by high inflation and interest rates due to restrictive monetary policy. The investment outlook remains closely linked to the political climate in the country, and in particular to the implementation of the two principal reforms announced by the government: the new constitutional process (which is expected to continue throughout 2023), and the implementation of pensions reform.
The Moroccan economy will continue to experience significant external and budgetary imbalances despite the drop in global commodity prices. However, the country's macroeconomic stability is not under threat. Forex reserves are comfortable and the structure of public debt is favourable. Moreover, the economy should benefit from a rebound in agricultural production after a historic fall in 2022. However, the authorities still have a complex task to accomplish in an international climate that remains very unstable. Indeed, they must maintain a prudent economic policy, but they also might need to shore up economic activity once again. A pronounced growth slowdown in GDP excluding agriculture is expected.
Outlook for GDP growth, inflation, interest rates and exchange rates
The latest economic indicators updated on January 16, 2023 and the coming calendar
Since 2016 China has become Germany’s main trading partner. German imports from China account for almost 12% of Germany’s total trade, and exports account for 8%. Overall, trade with China now accounts for almost 20% of total German trade.While Germany's trade deficit with China has always been relatively modest in the past, it has widened substantially since the start of 2021.Germany, which has a particularly high level of industrial production, has a significant degree of dependence on China for imports of strategic inputs, particularly in relation to its supply of rare earths. The key German industries are also dependent on Chinese domestic demand, because on average around 20% of their sales are made there, and this proportion is continuing to increase
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.
The drop in gas prices, the decline in headline inflation and the improvement of survey data in December have created a feeling that for the Eurozone 2023 might be better than expected hitherto. The survey data bode well for the growth momentum at the turn of the year, which could create a favourable carry-over effect for GDP this year and some hope that lower inflation will mean fewer ECB rate hikes. However, caution is warranted. Inflation remains far too high and core inflation has moved higher in December. Moreover, survey data provide little or no information on the pace of growth beyond the first quarter of this year.
The global manufacturing PMI edged down in December on the back of a new, significant decline in the US and for the second month in a row an increase in the euro area where the improvement is broadbased.
The latest economic indicators updated on January 9 2023 and the coming calendar
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.
2022 was a year of profound transformation, of shifting geopolitical and economic paradigms. Looking ahead, 2023 should see a change of direction in key economic variables. Headline inflation should decline significantly, central bank rates should reach their cyclical peak and the US and the euro area should spend part of the year in recession. 2023 can be considered as a year of transition, paving the way for more disinflation, gradual rate cuts and a soft recovery in 2024.
