Building resilience to past and future shocks will be essential, as the political agenda and the (very) expansionary monetary policies will continue to stress-test major economies. The balance sheets of Central Banks, and the current accounts of countries will continue to be a major source of concern, but 2013 will also be about the resilience of households and companies.
Indeed, next year will be the same old wine in a brand new bottle, which explains why we keep our muddle-through scenario. The consolidation of (bold) economic policies will definitely be a trial in a world with limited growth. A turning point? Possibly, especially for the private sector in the euro zone which has been faced with a high degree of uncertainty. Our own forecasts show yet another increase in the number of insolvencies, even as growth picks up again, and financial stress stabilizes. In the rest of the world, we expect to see growing antagonism and protectionism, some of which had disappeared for twenty years and are now back, jeopardizing economic co-operation and recovery.
In the emerging world, often organized around one or several soon-to-be superpowers, be it in Asia, Latin America, Eastern Europe or Africa, political risks are on the rise and governance certainly put to the test, often scaring away investors. Also at stake is the resilience of industry sectors, supply chains and international trade. Indeed, the butterfly effect, coined by the meteorologist Lorenz, whereby a minor change in circumstances can cause a large change in outcome, is certainly the ultimate fear for the global economy. Interdependency and interconnectivity, especially through commodities and finance, make hedging more difficult.
Shortages of diapers and computer tablets and erratic moves on stock markets are signs of the type of volatility to expect, with stabilisers missing in action. Among solutions, more information to steer businesses, stronger global economic governance and an enriched toolbox (with private and public intermediation) for risk management are crucial to strengthen the resilience of the private sector, which has, for sure, developed a post-traumatic stress disorder.
Extract from Euler Hermes Macroeconomic, Risk and Insolvency Outlook - October 2012.
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