2023 Economic Predictions Revisited

At the start of 2023, we asked some of our Atradius experts in different departments about what economic predictions they had for the year. Read that blog here.

Wrapping up and moving into 2024, we are taking a look at these economic predictions, seeing how they turned out, and considering what’s coming in 2024. Overall, we’ve seen this year that the economy can be unpredictable, so maintaining security investing in Trade Credit Insurance could save your business.

Senior Economist, Theo Smid last year predicted that inflation would gradually ease in the U.S. and Eurozone in 2023. “This prediction has come true. Inflation came down in 2023 in both the U.S. and Eurozone. In the Eurozone, inflation started the year at 8.6% and was 4.3% in September. In the U.S., inflation came down from 6.4% to 3.7%. The decline in inflation happened as energy prices normalized and food price inflation came down as well. The inflation that remains is mostly driven by so-called ‘core inflation’, which consists of services and industrial goods. Core inflation remains high because past energy inflation still feeds into these components via second-round effects. Supply chain bottlenecks have also eased. Companies report lower shortages in input or equipment, and shipping rates have largely normalized to pre-pandemic levels. In early 2024, I expect inflation to come down further in the eurozone, and to briefly stabilize in the U.S (before it continues its declining path in 2024). Central banks seem to have reached the end of their hiking cycles, but we should not expect lower short-term rates before Spring 2024.”

Senior Underwriting Manager, Luca Colombo warned of an economic lower level of growth for Brazil going into 2024, “we are surprised at how resilient the economy has been in the past 12 months. There is a decrease in product prices, specifically corn and soybeans, which is affecting the cost of basic foods driving inflation down. Selic rate (Brazil interest rate) is reducing at a decent pace, but not fast enough. The path downward leads us to expect a better 2024. Looking at unemployment rate, Brazil used to have structural unemployment rate of 11%, now it seems to be lower. It has reached 7% which is the lowest seen since 2014.  Last year Luca predicted that Lula would pursue less market-focused policies and higher social spending. “This is coming, the economy is more resilient in terms of inflation, proving itself to be less easy to ignite because of changes in fundamentals of the economy. There is a light at the end of the tunnel, which will take time, this was unexpected because of the high inflation and lower purchasing power but things are adjusting, and the unemployment rate isn’t igniting new inflation cycles.”

Economist, Dana Bodnar, predicted 2023 to be a tough year for the oil industry primarily due to the geopolitical uncertainty surrounding the Russia Ukraine war. In 2023 we saw that “the price of oil broadly stayed within the range of USD 70 to USD 90 per barrel Brent through 2023. This is slightly lower than the USD 90 average for 2023 that we expected in December 2022. The price of oil was a bit lower than expected as Russian oil kept flowing despite sanctions, demand stayed subdued and US production reached record highs. Looking forward to 2024, US producers are reaping the benefits of efficiency improvements and we expect production to continue at record highs of over 19 million barrels per day in 2024. Higher US production reduces OPEC’s influence in keeping prices elevated through constraining supply as global demand continues to soften. We expect the price of oil to stay flat in 2024 around USD 80 per barrel Brent with the risk that it actually eases further, barring any major escalation of geopolitical conflicts.”

Regional Head of Collections, James Berry predicted a recession in 2023, noting that the severity may vary. “Looking back, the USA did not enter a recession but appears heading for a soft landing in the first half of 2024, due to strong Federal Reserve timely actions. Political conflicts with Ukraine and most recently with the Israeli Gaza conflict have set the stage for the possibility of these crises to expand. High interest rates in the US are now taking traction by negatively impacting business investment and profitability resulting in strong increases of insolvencies across multiple industry segments. Interest rates are on hold by the Federal Reserve with expectations of falling during 2024. However, the reduction will be fully moderated with the level of inflation. Unemployment sitting today at 3.9% will trend toward 5% by the end of 2024, a clear example of businesses belt tightening for renewed profitability. As we now enter 2024, we should all recognize the global economic uncertainties and best position and protect our businesses in this environment for the long haul. We do not see improvements of the US economic performance in the near term.”

Senior Manager, Credit Specialties, Jon Handen expected to see continued activity in the utilization of trade finance offerings from traditional lenders and non-bank financial institutions, even with the challenges that were starting to show potential going into 2023. Looking at this year “we’re feeling the effects of high interest rates, making it more expensive for businesses to borrow money. Combine that with ongoing inflation and banks becoming more cautious about lending, and it’s creating challenges. On top of that, rising global tensions and increased oversight from the US government could harm worldwide economic growth and trade. Despite the uncertainty, there are new ways being developed to help businesses and emerging markets. Traditional banks and other financial institutions are getting involved to provide solutions. One useful tool is non-payment insurance, which lenders use to reduce financial risks and support important trade activities.”