EXECUTIVE SUMMARY
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- The final quarter of 2022 and 2023 will be challenging as economic and political headwinds are increasing.
- Recession risks are rising as consumer and industrial confidence indicators are plummeting.
- Inflation is currently on a 40-year high but will moderate in 2023 because of base effects and tighter monetary policy.
- Supply chain risk is still above pre-pandemic levels but has fallen in recent months with maritime shipping costs dropping (also linked to the weaker economic outlook).
- Payments performance in Europe improved in mid-2022 but Ireland and the UK performed against the trend and saw longer delays in B2B payments. • The number of business failures in the EU rose in April-June 2022, a fifth consecutive quarter of increase.
- That said, the number of business failures still stands below pre-pandemic readings and some countries (such as Germany and Italy) still continue to report improvements.
- Looking ahead, credit risk in Europe will rise as the economy is slowing, interest rates are rising quickly and banks are likely to tighten lending. • Elections in France, Sweden and Italy in Q2 and Q3 2022 ended with at least partial victories of antiestablishment far-left and far-right parties
- Policy making will become more complicated as approval ratings for incumbent governments will fall amidst a cost of living crisis and the looming recession.
- Companies should assess counter-party risks closely and team up with trusted advisors to minimise the adverse impact of the deteriorating political and economic environment.
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