The global recovery continues in 2022, but a bumpy road lies ahead – Coface Barometer Q4 2021

HONG KONG SAR – Media OutReach – 22 February 2022 – Two years after the onset
of the pandemic, the global economy continues to recover, but still faces
significant challenges. After the lull in the 3rd quarter of 2021,
Omicron has highlighted the unpredictability of the pandemic and exacerbated
one of the main factors affecting the recovery: disruptions in supply chains.
The other major risk is the lasting inflation slippage. 
In this highly uncertain environment, Coface has made few changes to its
risk assessments following the waves of upgrades in previous quarters. In
total, four country risk assessments were upgraded, including Denmark, and two
were downgraded. In terms of sector risks, Coface upgraded twelve assessments,
notably in the paper and wood industries, where prices remain buoyant, and made
five downgrades, mainly in the energy sector in Europe.


after wave: the economy continues to slow down but to a lesser extent

health situation has once again required the implementation of restrictions in
many countries. However, although some European countries implemented partial lockdown
measures, the measures were overall much less drastic than before. The direct
economic effects were therefore less significant, even if the fallout remains
negative for sectors such as air transport, tourism, hotels and restaurants.

Supply chain disruptions will
run the extra mile

After initially affecting
the automotive industry, supply chain difficulties have spread to most sectors,
from manufacturing to construction. While the time of return to normality
remains hard to predict, it seems that the consensus of a gradual easing from
the 1st half of 2022 is overly optimistic and that disruptions and
material shortages are likely to continue. This has led Coface to lower its
2022 GDP growth forecasts for several European countries, as well as for the US
and China.

Furthermore, although the
recovery is continuing, the number of insolvencies, which is still very low for
the moment in most countries, including the United States, France and Germany,
should gradually rise in 2022, as it is already the case in the United Kingdom.

Inflation, a key concern for all economies in

The other major risk, inflation, is becoming
increasingly important, particularly as the rebound in commodity prices
continues, fuelled by short-term supply inertia and geopolitical tensions. This
inflation is now also being driven by the prices of manufactured goods in many
economies, as companies pass on increases in production costs to consumer

These high commodity prices are benefiting
the usual big winners. The Gulf region is expected to post strong growth performance
in 2022. Norway has recorded its highest ever trade surplus thanks to buoyant
oil and gas exports. Finally, many African countries, even those affected by
armed conflict or political upheaval, have still benefited from high prices for
energy, minerals, timber and agricultural products.

In the United
States, inflation and supply-side issues have dampened the recovery momentum.
While GDP growth is expected to remain solid in 2022 (+3.7%), these factors
will continue to weigh on activity. In the 4th quarter of 2021, the
annual inflation rate reached 7.0%, its highest level in 40 years. In response
to this price surge, the US Federal Reserve has become more aggressive and has
hinted at an imminent rate hike, triggering monetary tightening in some emerging

Europe, disruptions in supply chains, combined with strong demand, led to
higher producer and energy prices. Germany has experienced the highest
inflation in over 30 years. The situation is somewhat mixed in the rest of the
euro area: inflation remains relatively moderate in France, while prices have
soared in Spain. In the United Kingdom, inflation has risen to 5.4% and has led
the Bank of England to become the 1st major central bank to raise
its interest rate in December 2021, before doing so a 2nd time in
early February.

central scenario remains one of near peak inflation, which will ease as energy
prices and supply chain bottlenecks ease in the second half of the year.

Inflation is
likely to exacerbate social pressures

This sharp rise
in inflation risks exacerbates social pressures in emerging and developing
countries, which had already been reinforced by the increase in inequality
associated with the pandemic. In Africa, high energy & food prices, which
weigh heavily on households, have limited consumption to the extent that food
insecurity and poverty have increased. Fiscal support, already very limited on
the continent due to public debt levels, has been withdrawn and unemployment is
high in most countries. South Africa, Algeria, Angola, Mozambique, Nigeria, DRC,
Zimbabwe, Ethiopia, Guinea and Tunisia are examples of countries experiencing
increasing social pressures as a result of the crisis.

China going
against the grain

China’s slowdown
deepened in Q4 2021, with an annual growth rate of 4.0%, the slowest pace since
the peak of the pandemic in 2020. China’s economic recovery has been affected
by the slowdown in the property market, the continuation of the “zero-COVID”
strategy, which has weighed on household spending, weak investment growth and
energy shortages. In 2021, Chinese GDP grew by 8.1%.

Heavily affected
by the Delta variant in Q3 2021, the Asia-Pacific economies rebounded at the
end of the year. Pacific economies rebounded at the end of the year, in line
with the easing of restrictions. Most of the region’s economies had returned to
their pre-crisis GDP levels by the end of 2021, with the notable exceptions of
Japan and Thailand. However, the continued recovery could add to inflationary
pressures, especially if labour markets tighten.

The full barometer is available



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