Coface's chief economist presents his forecasts to MEB members

On Thursday 8 February, the Monaco Economic Board, in partnership with Gramaglia Assurances and Banque Populaire Méditerranée, welcomed Jean-Christophe Caffet, Coface's Chief Economist(1), to a breakfast conference. A fascinating presentation that gave the entrepreneurs in attendance an insight into future economic trends.

Introducing the event, MEB Chairman Michel Dotta pointed out that this conference, given by Coface's Chief Economist shortly after the famous Coface Country Risk Conference held every year in Paris, was now in its 17th edition, thanks to the loyalty of the event's sponsors, the BP MED bank and the Gramaglia group.

In front of the more than 80 entrepreneurs and officials attending, Jean-Christophe Caffet then spent more than an hour analysing the global macroeconomic situation and setting out his various scenarios for 2024, as well as the underlying trends for the next five to ten years.

Turning first to 2023, the Chief Economist explained the slowdown in inflation mainly as a result of the fall in commodity prices: the energy shock has been partly absorbed, there have been good agricultural harvests (with the notable exception of rice) and China's recovery has been disappointing. "Central banks are in no way responsible for this phenomenon, contrary to what we hear a lot (...) we give them far too much power!” The year ended with global growth of 2.6%, half a percentage point higher than expected. The causes? Essentially government interventionism (Covid-related measures and anti-inflation shields) and the resilience provided by excess household savings and corporate cash flow, "which helped absorb the shock of the Ukrainian crisis".

With regard to the short term, the title of Mr Caffet's presentation, From one risk to another, was revealing of the current situation. "We have moved from an essentially energy risk last year to a risk that is now mainly financial". He adds, "paradoxically, it's more reassuring because it's something we know more about". 

Despite a tightening of rates, there are no plans to return to pre-crisis conditions. "We have returned to pre-crisis rates in 2008, but with levels of public and private debt that have risen considerably". As a result, financing conditions will remain complicated for many businesses, which are experiencing an increasing number of insolvencies.

By 2024, global growth should be in the region of 2.2%, mainly driven by emerging countries, with Europe continuing its 'sluggish' pace and the United States, which had outperformed, expected to slow (from 2.4% in 2023 to 1.2% in 2024).

Despite this, Coface has raised its Country Risk rating for 12 countries, including 6 in Europe. In its other ranking, which looks at business sectors worldwide, Coface has upgraded the rating of seventeen sectors and downgraded five, reflecting a cautious optimism following the shocks of the recent crises.

Finally, looking to the longer term, Jean-Christophe Caffet sees the current and future situation as the end of a cycle of strong growth and low inflation. A number of major challenges lie ahead, starting with the energy transition "which is going to be very expensive in a higher interest rate environment". Another trend is the relocation of production units to "friendly" countries, known as "friendshoring", or the duplication of units to reduce risks (China + 1 policy, which adds another country to China in the event of a problem). Finally, ageing populations, particularly in developed countries, will put a strain on finances 

To sum up, "we are going to move from a globalised world with strong growth, cheap energy and easily accessible money to a more volatile and fragmented world, with growth that, although weaker, will always be present"

At the end of his presentation, Jean-Christophe Caffet answered questions from the entrepreneurs in attendance, which focused on the situation in specific countries, including the next destinations for future MEB trade missions: Morocco, the United Kingdom and Poland. These are countries where opportunities are very much present.