Atradius: May Economic Outlook 2013 - Asia-Pacific Focus

Sydney, Australia 4 June 2013 – Atradius has released the Economic Outlook for May 2013. It follows from last November’s Economic Outlook which argued that we had possibly moved away from the abyss of another economic crisis. In our latest edition we have found that this is not necessarily the case.

The global economic environment has weakened over the past 6 months and we expect only modest economic growth in 2013. 2012 ended with just 2.6% global growth and a 0.5% contraction in the Eurozone. 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.

Global growth is expected to stabilise and reach 2.6% in 2013, more or less the same rate as last year, as growth in advanced markets remains sluggish and emerging markets continue their strong performance. The global economy is forecast to gain speed at the end of the year and improve in 2014 to 3.2%. 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%. Asia remains the driving force of the world economy. With economic growth in Asia buoyant again, Latin America’s economic environment will receive a boost this year as the continent is an important supplier of commodities, industrial products and goods to Asian markets. Recent economic developments in Brazil have not been as positive as expected at the end of 2012, when a mild recovery to fuel a broad-based domestic upswing in 2013 was anticipated.

The weak global outlook is 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. Applying our insolvency assessment framework (page 34), we expect the number of insolvencies to remain more or less stable across major markets in 2013. The insolvency environment continues to improve in the Asia-Pacific region, with Japan and New Zealand seeing insolvencies drop by 2% and 3% respectively. The insolvency matrix for 2013 indicates the insolvency situation for Australia as average but also still deteriorating with an expected insolvency growth of 3% in 2013. 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. In general terms, credit risk is elevated and will remain so throughout the forecast horizon.

Looking at the macroeconomic headline forecasts figures for Australia, the GDP growth is expected to decrease from 3.6% in 2012 to 2.5% in 2013. It is forecasted to increase to 2.9% in 2014. Inflation is expected to remain the same for 2014 at 2.5% as it was in 2013, and increase to 1.8% in 2012. The export growth for Australia in 2012 was 6.3%, decreasing to 4.8%, with a further decrease forecast to 2.7% in 2014.

For New Zealand, GDP growth is expected to decrease from 3% in 2012, to 2.7% in 2013, forecasted to then increase to 2.8% in 2014. Inflation is expected to increase from 1.1% in 2012 to 1.4% in 2013 with an additional increase to 2.3% expected in 2014. Export growth is expected to increase from 2.1% in 2012 to 2.6% and then decrease to 1.5% in 2014.

In terms of emerging markets the Asia Pacific (excluding Japan), is expecting a decrease in GDP growth from 6.7% in 2012 to 5.8% in 2013. It is forecasted to increase to 6.2% in 2014. Inflation is also expected to decrease from 5.6% in 2012 to 3.7% in 2013 and further decrease to 3.6% in 2014. Export growth is expected to decrease significantly from 8.9% in 2012 to 2.9% in 2013, and then increase to 4.9% in 2014.

For the full Economic Outlook report for May 2013 please click here.

About Atradius
The Atradius Group, a company of Grupo Catalana Occidente S.A., protects businesses against trade credit risks throughout the world with credit insurance, bonding, and collections services offered in 45 countries. With total revenue of EUR 1,554 million and a market share of approximately 31% of the global trade credit insurance market, Atradius’ products contribute to the growth of companies throughout the world by protecting them from the payment risks associated with selling products and services on credit. With 160 offices, Atradius has access to credit information on more than 100 million companies worldwide and makes around twenty thousand trade credit limit decisions daily.

Atradius Credit Insurance N.V. 

Level 5, 22 Pitt Street

Sydney NSW 2000

Ph: +61 (0) 2 9201 5222

E: info.au@atradius.com

W: www.atradius.com

Atradius: Economic Outlook May 2013

Summary

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.

To view the full report, please click here.

Atradius Credit Insurance N.V. 

Level 5, 22 Pitt Street

Sydney NSW 2000

Ph: +61 (0) 2 9201 5222

E: info.au@atradius.com

W: www.atradius.com