The global economic environment has weakened over the past six months and we expect only modest economic growth in 2013. Global growth is projected to improve at the end of the year due to a better economic performance in the United States and stabilisation of the Eurozone economy. However, there is a high risk that economic growth will be even slower than pictured in this outlook.
Key points
- Global economic growth is expected to stabilise at 2.6% this year as growth in advanced markets remains sluggish and emerging markets continue their strong performance.
- Eurozone GDP is expected to shrink further in 2013, at a rate of -0.4%. Growth in the United States is stable at 2.1%. Asia and Latin America show strong and slightly improving growth rates.
- Risks to the global outlook are high: the Eurozone crisis could intensify, fiscal consolidation may derail the economic recovery in the United States and growth in emerging markets may slow.
- While the overall insolvency environment stabilises, we forecast rising insolvencies in 10 out of the 22 markets that we track. Eurozone countries in particular will see a further increase due to the ongoing weak economic conditions.
Global growth is expected to reach 2.6% in 2013, more or less the same rate as last year. The global economy is forecast to gain speed at the end of the year and improve in 2014 to 3.2%. However, for this acceleration in growth to take place, a number of conditions need to be met. Firstly, the Eurozone should continue implementing banking union and make progress on fiscal and political integration. Secondly, the United States should reduce its frontloaded austerity. Thirdly, emerging markets have to maintain their rapid expansion. These assumptions are far from certain and therefore the downside risks to the outlook remain high.
Global trade grew by just 2.5% in 2012: well below the long-term average of 5.4%. We now expect slow trade growth in 2013 due to the weak global environment, credit constraints and increased protectionism. Trade between emerging markets is however expected to continue growing rapidly.
Advanced markets are characterised by a combination of fiscal consolidation and loose monetary policy. Despite the latter, bank lending conditions for both firms and households are still tough. The Eurozone will contract again this year, but may resume positive growth in 2014. Financial market conditions have improved significantly over the past six months, but this has yet to translate into better economic conditions. Unemployment in Europe has reached a record level and consumers remain pessimistic. Economic growth in the United States of 2.1% in 2013 and 2.7% in 2014 marks a relatively weak but steady recovery.
Emerging markets remain the driving force of global growth. Asia, excluding Japan, is expected to grow 6.6% this year, largely thanks to China, whose growth is projected to reach 8.2%. Latin America will benefit from this strong growth in Asia, increasing its growth to 3.4%, up from a moderate 2.7% last year. Eastern Europe is heavily influenced by the weak economic conditions in the Eurozone, but growth may pick up to reflect a better Eurozone performance in 2014. Emerging markets face risks associated with large capital inflows, as the expansionary monetary policy regimes in advanced markets seek profitable investment opportunities.
The weak global outlook is however consistent with a stabilisation of the insolvency environment in many markets, with the aggregate insolvency frequency even improving marginally in 2013. The Eurozone shows a moderate increase in the already high level of insolvencies, while the Eurozone periphery will see a more significant increase. Conditions improve in the Asia-Pacific region and the United States because of their relatively better economic conditions. In general terms, credit risk is elevated and will remain so throughout the forecast horizon.
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Atradius Credit Insurance N.V. Level 5, 22 Pitt StreetSydney NSW 2000Ph: +61 (0) 2 9201 5222
Atradius Credit Insurance N.V. 
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