Global growth enters difficult phase: Allianz Trade

Allianz Trade is forecasting global GDP growth of 2.9 percent this year and 2.5 percent in 2023, a decrease of 0.4 percentage points and 0.3 percentage points, respectively, compared to Allianz Trade's last forecast in March. The change is due to an increase in the direct and indirect impact of the war in Ukraine and longer-than-expected lockdowns in China, which will reduce output levels by 1.2 percentage points and 0.6 percentage points in 2022 and 2023 respectively. Global trade levels likely contracted in the second quarter of 2022 by 1.3 percent. The reopening of the Chinese economy will help trade, and thus global GDP growth, catch up a bit, especially with the start of summer, but the expected recovery will be somewhat tentative. Allianz Trade forecasts world trade growth in volume terms of 3.5 percent in 2022 and 3.6 percent in 2023, well below the consensus. In value terms, the dollar's strength and high inflation in 2022 will push nominal growth to 10.4 percent, but this will decline to 4.2 percent in 2023.

Although Allianz Trade's baseline scenario for 2022 still assumes a soft landing, the risk of recession is snowballing. This time, however, the concern is not only about the size of the recession but also about the distributional effect. 

(WBJ)