What We're Reading:

What We're Reading:

China COVID: Unrest continues in Guangzhou as lockdown anger grows. People in the southern Chinese city of Guangzhou have clashed with police in the latest protest against the country's strict COVID rules. (BBC)

Citi warns ‘rolling recessions’ will shake global economy in 2023. Citi believes the eurozone and U.K. will enter a recession by the end of this year. The U.S. stands to enter a recession by mid-2023. (Yahoo Finance)

Biden, Macron vow unity against Russia, discuss trade row. Presidents Joe Biden and Emmanuel Macron vowed to maintain a united front against Russia on Thursday amid growing worries about waning support for Ukraine’s war effort in the U.S. and Europe. (AP)

US job cuts leave Asian tech workers in limbo. As U.S. tech companies shed thousands of workers, those coming from abroad are being disproportionately affected by the job cuts. (DW)

Brexit: Progress on trade deals slower than promised. The government is set to miss its target for securing post-Brexit trade agreements, as figures show a 15% fall in the number of U.K. exporters. (BBC)

In new role as G-20 chair, India set to focus on climate. India officially takes up its role as chair of the Group of 20 leading economies for the coming year and it’s putting climate at the top of the group’s priorities. (AP)

Philippines will explore for oil in South China Sea even without a deal with Beijing: Marcos. The Philippines must find a way to explore for oil and gas in the South China Sea even without a deal with China, President Ferdinand Marcos Jr. said on Thursday, emphasizing his country’s right to exploit energy reserves in the contested waterway. (CNN)

Global insurance pricing increases moderate again in third quarter 2022. Global commercial insurance prices increased 6%, on average, in the third quarter of 2022, compared to the 9% increase seen in the second quarter. It was the twentieth consecutive quarter of rising average pricing in the Marsh Global Insurance Market Index. (Brink News)

Senate votes to force labor agreement on rail workers—minus sick leave. The Senate voted 80-15 Thursday to intervene on a potential rail strike. It is the first time since 1991 that Congress intervened on a rail labor dispute. (Freightwaves)

US signals shift to slower interest rate increases. The head of the U.S. central bank has said authorities may start to ease up on interest rate hikes as soon as this month, after racing to raise borrowing costs earlier this year. (BBC)

China should end its anti-COVID lockdowns, the head of the IMF says. It is time for China to move away from massive lockdowns and toward a more targeted approach to COVID-19, the head of the International Monetary Fund said days after widespread protests broke out, a change that would ease the impact to a world economy already struggling with high inflation, an energy crisis and disrupted food supply. (AP)

WTO: Global import demand below trend as goods trade growth continues to slow. Prospects for trade growth in the final months of 2022 and into 2023 continue to look bleak, with weaker global import demand only slightly offset by strong results for the automobile sector, according to the latest goods trade barometer from the World Trade Organization. (Global Trade Review)

The (literally) cold war in Ukraine. Russian attacks have repeatedly targeted Ukrainian energy and heating infrastructure, threatening to leave millions vulnerable to the approaching bitter cold of winter. (NPR)

Europe is currently faced with some of the most challenging economic circumstances around the globe, with high inflation, instability from the Russia-Ukraine war and an increasingly severe energy crisis. Experts say Europe is in for a difficult 2023 and possible recession.

European credit professionals need to work together now more than ever to protect their companies from the turbulent times ahead. And creditors who do business with customers in Europe need to stay ahead of emerging risks.

FCIB is presenting a new networking opportunity for its members to connect online once a month. The European Credit Executives Network will provide a platform for members to ask questions, talk directly to experts and engage with other European credit and risk managers.

“As an association, we aren’t much if we can’t provide our members with a community,” said David Anderson, FCIB’s director of member relations. “So, it’s very important that FCIB members build and maintain those connections.”

There is no better way to stay informed about changes in global trade than by speaking with fellow credit professionals and exchanging ideas. International experts will also join the meetings to answer any questions in real-time and provide market updates.

Reserve your spot now for the first European Credit Executives Network meeting on Jan. 19, 2023 at 1500 CET. We will hear from Markus Kuger, an economist who served as chief economic adviser for Baker Ing, as he delivers a European economic outlook at the first meeting. Kuger has over 10 years of experience in the country risk world, specializing in labor markets, monetary policy and European economics.

All FCIB members are welcome, but European members are strongly encouraged to attend.

A surge in global prices for fuel and food in the aftermath of Russia’s invasion of Ukraine triggered a bal­ance-of-payments crisis that resulted in the government’s default on some $51 billion of foreign debt in April, forcing Sri Lanka to seek a bailout from the IMF. The accompanying economic troubles, including soaring inflation and the collapse of the rupee, fueled widespread protests that rocked the government headed by the SLPP, culminating in the resignation of President Gotabaya Rajapaksa in July, barely more than halfway through his five-year term.

The president’s resignation came two months after his brother, Mahinda Rajapaksa, a two-term former president, stepped down as prime minister. His replacement, Ranil Wickremesinghe, became in­terim president following Gotabaya Rajapaksa’s resignation. Although Wickremesinghe was elected by a majority of lawmakers (in a secret ballot) to serve out the remainder of the five-year term, the fact remains that he failed to fulfill his primary task of building a national unity coalition, and he will very likely struggle to re­tain the support of the SLPP and its allies as he attempts to implement an IMF-guided reform program that will be essential to repairing the damage to a badly crippled economy.

The president is empowered to dissolve the National Assembly and call a snap election at any time after the mid-point of the current term, which will be reached in March 2023, and barring an unexpected improve­ment in the economic outlook, he will very likely come under heavy pressure from the opposition to exercise that option. The main opposition SJB and the leftist NPP alliance are already waging a battle for the anti-establish­ment vote that shows every sign of devolving into an exercise in populist one-upmanship that will complicate the task of restoring confidence.

The government reached a staff-level agreement with the IMF for a four-year, $2.9 billion EFF arrange­ment on Sept. 1, and the draft budget for 2023 due to be unveiled in mid-November will be scrutinized to see whether Wickremesinghe’s re­formist ambitions are consistent with the IMF’s expectations. The latter include implementation of additional tax measures required to achieve a primary surplus equivalent to 2.3% of GDP by 2025, the introduction of reforms aimed at enhancing the independence of the central bank, and various measures designed to replenish the exhausted supply of foreign-exchange reserves, bolster the banking system and stem financial losses from corruption.

Wickremesinghe has managed to secure the legislative votes required to implement the fiscal measures pursued to date, but his support could evaporate if the reforms provoke a strong backlash. The risks on that score will be greatly magnified if the Rajapaksas conclude that undermin­ing Wickremesinghe might facilitate their own political comeback.

The prospects for the success of debt negotiations are also uncertain, in large party owing to the prominent role of China, which holds more than 10% of Sri Lanka’s total foreign debt. There is some concern that Beijing’s characteristic resistance to any write-off of its loans will create an obstacle to convincing other creditors to take that step, without which the IMF has suggested Sri Lanka’s debt burden will remain unsustainable.

The analysis above is taken from the October 2022 Political Risk Letter (PRL). The best-in-class monthly newsletter, written by the PRS Group, provides concise, easy-to-digest briefs on up to 10 countries, with additional recaps updating prior month’s reports. Each month’s Political and Economic Forecasts Table covers 100 countries, with 18-month and five-year forecasts for KPIs such as turmoil, financial transfer and export market risk. It also includes country rating changes, providing an excellent method of tracking ratings and risk for the countries where credit professionals do business. FCIB and NACM members receive a 10% discount on PRS Country Reports and the PRL by subscribing through FCIB. 

Christopher McKee, Ph.D., economist and CEO of The PRS Group, is FCIB's newest global expert. Members can watch his most recent Global Expert Briefing on political risk on-demand.

COVID-19 cases have spread across China in recent weeks, forcing multiple cities into lockdowns as part of the country’s strict zero-COVID policy. But the ongoing closures since the start of the pandemic in 2020 are now causing unrest among citizens.

Even as other countries eased their restrictions, China’s zero-COVID policy has kept the rules in place—and the results of this decision not only impact communities, but the economy as well. “You cannot keep a country locked down. Why? Because right now what's happening in China is the economy has been impacted, the livelihood has been impacted and as a result, lives are being impacted meaning more mental health [crises], quality of life is really bad, more chronic conditions,” Dr. Ali Mokdad, epidemiologist with the University of Washington's Institute for Health Metrics and Evaluation in Seattle, told ABC News.

Anti-lockdown protests broke out in major cities such as Shanghai, Guangzhou, Wuhan and Beijing. Local officials reported a deadly apartment fire caused by a power strip killed 10 people, with over three hours to put the massive fire out, per ABC News. Enraged citizens believe COVID restrictions played a part in the obstruction of rescue from the fire department, not able to save those who were inside.

Chinese authorities have loosened some COVID-19 protocols in cities including Guangzhou and Chengdu, “easing testing requirements and controls on movement,” according to AP News. “Still, many of the rules that brought people into the streets of Shanghai, Beijing and at least six other cities remain in force.”

Some residents have gone without sufficient food supply and medical care with such strict policies, and supply chains have been extremely backed up in the manufacturing sector, ABC News reported. The zero-COVID policy continues to stunt China’s economic productivity, impacting other countries as well. “When consumers are locked down in these different cities, it's a gut punch to the U.S. economy. It has reached a fork in the road,” said Dan Ives, managing director of equity research at Wedbush investment firm.

Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate