What our clients expect for 2023

In December we conducted our annual macroeconomic survey, asking our clients to take a look into the future of the global economy. As we look back on a year full of challenges for the global economy and head into 2023 full of uncertainty, we explore the key findings from our client survey, including questions on global growth, inflation, key risks, and the war in Ukraine.

On average, our clients share our view that inflation will fall sharply in 2023. However, they continue to see stubborn inflation – together with high energy prices and the war in Ukraine – as the biggest risks to the outlook. And overall, clients are slightly more pessimistic on growth than we are – at least in Europe and North America.

105 clients responded to the survey in December 2022 with 39% being based in Europe, 37% in the Americas, 22% in Asia and 2% in Africa. Out of the 105 respondents, 49% worked in the metals industry, 13% in mining, 13% in fertilizers and 6% in financial and trading industries, with the remaining 19% in other sectors (energy, end-use or other).

Our clients expect global growth to slow down in 2023

CRU forecasts global growth of 1.6% in 2023, with Europe and the US sliding into a mild recession. Our clients are, on average, slightly more pessimistic. 40% of clients expected growth between 0% and 1%, with a further 17% expecting GDP to see an outright fall. Only 13% expect growth to be higher than 2%. There is some regional variation in the responses; clients in Asia are on average notably more optimistic, and those in the Americas more pessimistic, about growth in 2023 (Figure 1).

Uncertain times with inflation, energy and war in minds

We asked our clients to name their top three upside and top three downside risks for the new year. The results are shown in Figure 2. Prolonged inflation was the most widely cited downside risk, with 68% of clients choosing it, followed by high energy prices (59%) and an escalation of the Russia-Ukraine war (44%) (Figure 2, left-hand side). The main risks identified by our clients are closely related to each other, with energy prices driving inflation and the Russia-Ukraine war leading to higher energy prices. Clients are less concerned about the impact of climate change in 2023 or a further deterioration in US-China relations. We agree that prolonged high inflation and continued high energy prices are major downside risks, which we have discussed in a recent?blog post?and?Insight.

The related issues of the war, energy and inflation also provided some of the most cited upside risks (Figure 2, right-hand side). However, the upside risk named by most clients was a quick and smooth exit by China from its zero-Covid policy, which 57% of respondents choose. Although China’s exit from its zero-Covid policy has certainly been quick, it has not so far been smooth.

Clients expect inflation to fall – but how fast?

High energy prices, supply chain problems and strong demand have led to levels of inflation unseen in recent history, peaking at 9.1% in the US and 10.6% in the eurozone. With moderating energy prices, easing supply problems and tighter monetary policy, we expect inflation to fall sharply in 2023, averaging 4.1% in the US and 5.5% in the eurozone. The majority of our clients agree with our view, expecting inflation of between 3-5% in the US and 4-6% in the eurozone (Figure 3). Clients see more upside risk to inflation in the eurozone, with a greater skew in the distribution. Clients based in Asia are more cautious, with a greater proportion expecting inflation to fall more slowly in both the US and the eurozone.

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