Summary:
- Recession risks seen rising if war persists
- Global trade growth downgraded to 2–5%
- Growth driven more by prices than volumes
- Supply chain risks flagged by majority of exporters
- Firms adapting via stockpiling and diversification
- Eurozone downside growth seen near 0.2%
Recession risks are expected to become more pronounced later this year (US fall season) if the Middle East conflict continues, according to Allianz Trade’s head of economic research, Ana Boata, who warned that the economic fallout is building steadily as the crisis drags on.
Speaking to CNBC on Friday, Boata stressed that timing is critical, noting that each additional week of conflict erodes corporate confidence and increases economic costs. The cumulative effect is already showing up in global trade dynamics, with growth forecasts sharply downgraded. Global trade expansion is now expected to come in between 2% and 5% this year, a significant step down from earlier expectations of around 10%.
Crucially, the modest growth that remains is being driven more by rising prices than by increased trade volumes, reflecting the inflationary nature of the current environment rather than genuine demand strength.
Supply chain risks remain front and centre, with around 65% of exporters identifying disruptions as a key concern. The conflict is expected to tighten availability across a range of critical inputs, including oil and gas, fertilisers, helium, and aluminium, materials that feed into industries spanning agriculture, advanced technology, and construction.
Despite these pressures, companies are not standing still. Firms are actively adapting by front-loading shipments, building inventories, and diversifying supplier networks in an effort to minimise disruption. These responses reflect lessons learned from recent shocks, including the pandemic, the 2022 energy crisis, and escalating trade tensions.
In a downside scenario where disruptions persist, Eurozone growth could slow to just 0.2%, while inflation pressures may force central banks to tighten policy further, raising the risk of weaker equity markets—particularly in the United States toward year-end.
Asia remains comparatively resilient, with growth in key hubs such as Singapore projected at around 3% to 3.5%, offering some offset to broader global weakness.
WWJD?
This article was written by Eamonn Sheridan at investinglive.com.
