What We're Reading:

What We're Reading:

China’s imports, exports plunge in warning sign for economy. China’s exports plummeted in December at their fastest pace since 2020, while imports sharply slowed, signaling risks to the recovery of the world’s second-largest economy. (Aljazeera)

German economy seen stagnating in Q4, grew 1.9% in 2022. The German economy appears to have stagnated in the fourth quarter, the national statistics office said Friday, while Europe’s biggest economy managed full-year growth of 1.9%. (AP)

UK to further delay calling Northern Ireland election as Brexit talks continue. Senior EU sources said “slow progress” was being made in talks between the U.K. and Brussels, dampening hopes of a breakthrough by the end of January on the protracted dispute over the Northern Ireland protocol. (The Guardian)

Does easing US inflation point the way for the world? The U.S. helped spark a global surge in the cost of living. Now that the country's price inflation shows signs of easing, does it point the way for the rest of the world? (BBC)

Demand-supply gaps and geoeconomic confrontation top WEF risk report. Major risks facing global trade over the next two years include crises in food and energy supply chains and geoeconomic conflict, according to a report released today by the World Economic Forum. (Global Trade Review)

Global economy ‘perilously close’ to a recession: World Bank. The global economy will come “perilously close” to a recession this year, led by weaker growth in all the world’s top economies. (Aljazeera)

Democrats push for Bolsonaro to be booted from the U.S. as Brazil investigates riots. Less than two weeks on the job, Brazilian President Luiz Inácio Lula da Silva faces an incredible challenge: the aftermath of the most serious assault on the country's institutions since its return to democracy from dictatorship in the 1980s. (NPR)

UK economy beats expectations with November growth. The economy expanded by 0.1%, helped by demand for services in the tech sector and in spite of households being squeezed by rising prices. (BBC)

Fraud is the biggest threat to cargo losses. The almost exclusive use of online facilities to process business transactions allows a myriad of fraudulent pursuits to find opportunities within the complexities of the global supply chain. (HSN)

'It's like gold': Onions now cost more than meat in the Philippines. The country is facing a national onion shortage as inflation hikes prices and climate change continues to wreak havoc on crops. (NPR)

Millions of businesses hammered by the pandemic need to start paying back COVID loans. At the start of the pandemic, as business stalled, nearly 3.8 million small business owners took out Economic Injury Disaster Loans (known as EIDL loans) from the federal government, averaging roughly $100,000 per loan, according to the Small Business Administration. (CNN)

Sri Lanka's central bank urges China and India to reduce its debts. Sri Lanka's central bank has urged China and India to agree a write-down of their loans as soon as possible. (BBC)

Markus Kuger is the chief economic adviser for Baker Ing and holds a Diploma in Economics with a specialization in labor markets, monetary policy and European economics. He has more than 10 years of experience in the country risk world.

After working for the European Parliament in Brussels, he joined Dun & Bradstreet’s Country Insight Services in London in 2010. In this role, he combined the company’s vast micro-economic data with his macroeconomic and political knowledge and covered for U.K., France, Germany and Italy. He served as Dun & Bradstreet’s Chief Economist from 2018 to 2021, and regularly spoke in front of domestic and international audiences, including several TV appearances and keynote speeches.

NACM: What factors are creating high credit risk in Europe?

KUGER: Credit risk in Europe is rising and inflation is to blame. High interest rates are raising the number of business failures and bankruptcies. Companies are closing because they’re not making enough money or have to pay loans taken out during the pandemic. On the bankruptcy front, that is quite daunting but for credit managers, this is the time to be more aware of what’s happening in that field because if your customer isn’t paying you, it will create a cashflow problem.

In terms of GDP, the economy will worsen in 2023. A lot of European countries will fall into recession while others are already in one. Despite the growing recession risk, the labor market is tighter than ever. Normally, when countries enter recession, unemployment rates rise—but many European countries are close to full employment with unemployment rates at a multi-year low. There will be a modest uptick in unemployment but in most sectors at the moment, there is actually a shortage of workers.

NACM: What are your expectations for inflation this year?

KUGER: We’ve hit double-digit inflation rates in many countries in Europe at the end of last year. The good news is that inflation will probably come down in 2023. But you have to keep in mind that it won’t hit the target rate of central banks anytime soon. At the end of last year, Europe’s inflation rate reached 10%, which is far above their target rate of around 2%. This year, the inflation rate will decrease to 6% or 7% in many European countries but the pace will be quite slow.

NACM: How will the energy crisis play out in Europe?

KUGER: Energy prices have phased out after increasing significantly last year. Not only that, the prices of hydrocarbon products in Europe have come down over the last few months. Some countries, like Germany, have launched support packages to suppress energy price inflation. Despite these efforts, they won’t reach the 2% inflation rate target until 2025.

Some countries have launched packages to suppress energy price inflation. In Germany, work has been done in terms of building an LNG Terminal, tankers filled with liquified natural gas from around the globe. Germany recently signed a 15-year deal with Qatar for the purchase of liquefied natural gas and now gas from the U.S. has been shipped to help. Having a warmer winter certainly helped conserve energy so far this year, far from the 2022 prediction of a destabilizing energy crisis for Europe in 2023.

NACM: How has this affected credit management in Europe?

KUGER: It’s not only the rising cost of credit but the limited access to credit that’s affected Europe. Banks have tightened their loan conditions, so it’s much harder to go to a bank now and ask for credit. Banks are more reluctant now to give you the money. That is having a ramification in the credit risk world and that is certainly something that will remain enforced in 2023.

FCIB's European Credit Executive Network will feature guest speakers, help members address challenges and risks, and find new opportunities. On the 3rd Thursday of each month at 1500 CET, FCIB will provide you with a platform to ask questions, talk directly to experts and engage with other European credit and risk managers.

Reserve your spot now for the first European Credit Executive Network meeting on Jan. 19, 2023 at 1500 CET. All FCIB members are welcome, but European members are strongly encouraged to attend.

Political unrest in Brazil boiled over last week as citizens stormed the country’s capital in protest of the election results. Supporters of former President Jair Bolsonaro took matters into their own hands this past weekend upon President Lula da Silva’s administration’s takeover, putting democracy at high risk.

“The effort to overturn the outcome of the election will prove futile, as the transition of power to Lula has already been finalized and he is unlikely to resign,” said Brendan Mckenna, international economist at Wells Fargo Securities. “We believe Brazil's ‘January 6 moment’ will not have a long-lasting impact on local financial markets nor the economy.”

Politicians have compared these riots to the U.S. riot of the capital, sending several citizens to jail. Right-wing supporters of former President Bolsonaro say Da Silva “won in a stolen election,” per ABC News.

As Brazil’s financial markets continue to struggle, the economy is expected to enter a mild recession by mid-2023. And economists believe Brazilian Central Bank (BCB) policymakers will introduce an eased cycle in Q3 this year, per Wells Fargo Economics. “The insurrection certainly contributes to short-term downside risks. In the near-term, we will be focused on the Lula administration's reaction to the riots, especially since federal intervention is in place through the end of the month,” the article reads. “Federal intervention gives Lula the power to deploy military and state police to enforce law and order, and if the response results in more conflict, the currency should suffer and our short-term outlook would likely change.”

President Lula’s fiscal policies during his campaign advocated to financially support lower income households to aid in economic growth, but the current state of Brazil’s public finances can potentially place the country’s sovereign debt in an unsustainable position. “Given our view on BCB monetary policy, we believe markets are mispricing BCB monetary policy,” said Mckenna. “Risks to the long-term view are also rising, but for the time being we maintain our view the USD/BRL exchange rate can reach BRL5.00 by the end of 2023.”

There’s never been more uncertainty, more change and more conflict, and there’s never been a more exciting time to lead. If you have the courage to tell yourself the truth, set new boundaries, promote personal responsibility, stop appeasing and become a radical listener. Here are five ways to grow your leadership courage in 2023.

1. Tell yourself the truth

Take an honest assessment of your leadership challenges. Have you been letting people off the hook because you dread initiating difficult conversations? Have you been accused of not caring, being too aggressive, or micromanaging? Do you know how other see you as a leader? 

If you can be honest about your challenges, you can improve almost any situation, but truth-telling always comes first.  

Why it takes courage: The truth hurts. The first sign of increased awareness is aversion. It never feels good to have blind spots revealed. As a result, we avoid hearing or seeing things that make us uncomfortable. Once you have the courage to face reality, the truth stops hurting and instead sets you free.

2. Set new boundaries

One of the primary reasons for workplace conflict is the unwillingness or inability to set appropriate boundaries. If your open door has been a revolving door; if you’re fixing everyone’s problems; if you want their success more than they do, you need to set some boundaries. Start by owning the part you played, then update relevant individuals that you’re setting a new boundary. Make sure you intend to enforce the boundary by communicating the consequences of crossing the boundary. 

Why it takes courage: When you enforce a boundary, someone’s going to be unhappy. It’s tempting to back down to keep harmony or make them understand, however the reason you needed a boundary in the first place is because they were taking advantage. Remember this: someone is going to be unhappy, but it doesn’t always have to be you. It takes courage to let people feel what they feel without having to back down from your boundary. 

3. Promote personal responsibility

Observe “victim mentality” by looking for evidence of blame and gossip. When someone talks about how someone else did them wrong, notice that they talk to everyone except the person who did the wrongdoing. If a team member comes to you with what “everyone else thinks,” take a breath and ask, “What do you think?” Most of the time they will say they are “fine” but needed you to understand everyone else’s point of view. I call this the “power of attorney trap” where one person represents everyone else except themselves. Promote personal responsibility by making people represent themselves first.

Why it takes courage: As a leader you’ll be tempted to listen to gossip to get a head’s up about who is doing what to whom. You want to shift gears by making sure you don’t get distracted listening to hearsay about what everyone else thinks. Instead, ask the person represent themselves. If they have a problem with another colleague, employee or superior, coach the person complaining to go to the person with whom they have a complaint instead of expecting you to fix things without their participation. 

4. Stop appeasing

It’s easy to agree with an idea when you don’t have time to think about it, or don’t have to back it up. If you tell employees, “Good idea,” when you know it’s not, or if you’re promising to get back to someone without putting it on the calendar, chances are you’re appeasing. Stop going along for the sake of convenience.

Why it takes courage: You have to give up short term gains and let go of the addiction to feeling good in the moment. It seems harmless when you don’t have the energy for misunderstanding, but to build bridges for the future you have to stop making promises built on sand. Stop people-pleasing and instead make your word golden.

5. Become a radical listener

Conflict is never easy and that’s why so many of us avoid conflict at all costs. If you find yourself getting triggered, interrupting, getting aggressive or shutting down conversations, it means emotions are getting the best of you. The skill you need is counterproductive: listening when you’d rather fight or flee. 

Why it takes courage: When in the middle of a conflict or disagreement or when you feel misjudged, every bone in your body wants to be understood—to make a point—to share the facts, argue and make the other person wrong. But these tactics never work. It takes overriding years of programming to take a breath and say, “Tell me more.” As Stephen Covey would say, “Seek first to understand.” The one who listens first controls the conversation. 

No matter what the difficulty, leaders can develop the courage to cope with uncertainty, navigate through change and manage conflict effectively. 

Marlene Chism is a consultant, speaker and the author of From Conflict to Courage: How to Stop Avoiding and Start Leading (Berrett-Koehler 2022). She is a recognized expert on the LinkedIn Global Learning platform. Connect with Chism via LinkedIn, or at MarleneChism.com

This article first appeared on SmartBrief.

Week in Review Editorial Team:

David C. Anderson, Director, FCIB Member Relations

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate