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Recession, avoided or delayed ?

Macroéconomie | L'Europe et le monde

Written for session 2 – Recession, avoided or delayed ?

On the recession risk and the economic cycle

At Amundi, we believe the global economic slowdown has started, with manufacturing and will then then spread to services sectors. Indeed, the euro zone economy fell into a technical recession in the first three months of 2023, with two consecutive quarters of negative growth, and we expect a mild recession in the US starting at the end of the year. This ‘technical’ recession is mainly driven by tight financing conditions maintained by central banks to bring inflation back down to 2%. There are two levels of ongoing tightening: CB tightening and banks tightening, operating on both cost and availability of credit.

Our scenario is that we are therefore in the camp of a soft recession in advanced economies, which has been partially delayed by consumption strength in the US and strong growth in emerging economies, China and India in particular.

In that context, we revised slightly up our Global GDP growth to 2.9% for 2023 and 2.4% in 2024. At this stage we don’t see any deep recession – as we’ve seen during the Global Financial Crisis-  happening.

Inflation is coming down, but appears far stickier than expected. Services sectors inflation in advanced economies remain elevated and core inflation will take longer to converge to the 2% target. To us, the combination of a delayed and soft recession in advanced economies, and sticky core inflation means that central banks will maintain policy rates at terminal level as long as possible and probably until the end of 2023 or beginning 2024 as far as the Federal Reserve is concerned and potentially even later for the ECB.

The nature of the new economic cycle is difficult to predict. However, we believe that the energy transition and the need of fiscal support will play an important role. Geopolitical risks are here to stay. The transition away from fossil fuels into clean and renewable energy will generate new dependencies, producing a geopolitical landscape that is ever more complex and entangled.

The economic new cycle might be weak at least on the short term, but the technological advances brought about by the fourth industrial revolution have appeared to shift into top gear in 2023 with artificial intelligence. We should therefore assume growing productivity in many sectors and in services in particular, eventually leading to positive return on invested capital.

Coming to responsible investment, the challenge of energy transition is huge. Europe is at the forefront. It is a great opportunity to innovate and invest in our industries, with a long term view. This will be a major source of economic development and a way to reinforce European sovereignty.

Net Zero related themes will shape investment strategies going forward. Water scarcity, renewable energy, recycle and waste management, biodiversity protection, energy efficient infrastructures are among the long term investment themes that will design the future of our economies and our societies. Public funding won’t be enough. Private investments and households savings will be key to provide long term capital and ensure a successful green and inclusive transition. New investment vehicles and saving products are being created in France to channel investments towards this goal. I am confident that we have the resources and the skills to make this journey a success, but I am mindful that the road will be bumpy and that all players, public authorities, corporates as much as the financial sector have to be involved.

On Amundi investment capabilities & thematic in this new cycle

Amundi diversified business model across regions and asset classes, should allow us to service our clients and manage their assets in this new environment.

Being one of the world’s leading asset manager, Amundi has developed a robust strategy to navigate with agility the complexities of the financial markets and drive sustainable growth.

Our global footprint enables us to offer our clients a broad range of investment solutions, tailored to their specific requirements and risk profiles.

We established ourself as a trusted long-term partner for investors, in an ever-changing financial landscape. The relationships we built over the years with our partner networks and our large customer base, wholesale or institutional, are a key strength.

In these uncertain times, the strategic goals of our 2025 Ambitions plan remain unchanged : strengthen our international expansion  in Europe and Asia; uphold our global leadership in responsible investment; build and sell technological solutions along the entire value chain as a true digital servicer ; pursue profitable organic growth complemented  by acquisitions, to boost our capacity to create value.

As for the long term, we see an increasing need for savings across the globe. These positive trends will offer major growth opportunities for a global asset manager such as ourselves.

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