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Jean-Christophe Caffet: economic trends for 2024

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Jean-Christophe Caffet has been Coface's Chief Economist since November 2021. © MEB / Sébastien Darrasse

Coface (Compagnie Française d’Assurance pour le Commerce Extérieur – French International Trade Insurance Company) has been coming to the Principality to present the state of the economy in countries around the world, for the past 17 years. Last week, the organisation was the guest of the Monaco Economic Board (MEB). 

He has been Coface’s Chief Economist since November 2021, and this is the third time he has presented country risks in Monaco. Speaking to a gathering of MEB members and a number of external guests, Jean-Christophe Caffet outlined the global economic outlook using Coface’s country-by-country analyses. The Company works with more than 50,000 businesses and has a presence in over 100 countries.

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“From one risk to another”

For this conference, organised by the MEB and its sponsors, Banque Populaire de la Côte d’Azur and Gramaglia Assurances, Jean-Christophe Caffet’s presentation was entitled “From one risk to another.” 2023’s energy-related risk will be 2024’s financial risk.

Jean-Christophe Caffet delivered his talk to a large gathering of MEB members. © MEB / Sébastien Darrasse

Agricultural commodity prices “have corrected sharply,” the chief economist began. Prices are now below or close to what they were prior to the conflict between Russia and Ukraine. “A major exception is rice, whose prices remain very high.” The reason for this is the poor harvests in India, and the future does not look any brighter because of El Nino, a climate phenomenon that produces abnormally high water temperatures in the eastern part of the South Pacific Ocean.

Metals prices are relatively low. “In China, the upturn that was forecast at the end of 2022 with the reopening of the economy, was a little disappointing,” Jean-Christophe Caffet explained.  As a major consumer of metals, China triggered these low prices. One price that remains very high is gas, which is still twice what it was before the Ukrainian crisis.

“Inflation is falling everywhere”

As the chief economist points out, the disinflation process is “evident everywhere.” Whether in emerging countries or the world’s major economic powers, inflation is falling “for the same reasons it rose everywhere” after a collective shock, mainly to do with food and energy.  “When food and energy prices fall, so do consumer prices.”  The few exceptions in the world are Argentina, Venezuela and Turkey, where inflation is rising.

The drop is essentially “mechanical (…) and has nothing to do with the central banks’ monetary policies.” The chief economist believes that these banks are credited with too much power over consumer prices. “The fall in inflation is caused by low energy prices and a drop in commodity prices. This is because supply chains are back to normal after Covid, and because of a shift in household spending towards services.”

Country risk: whose rating is up?

In 2024, global growth should be in the region of 2.2%, mainly driven by emerging countries, with Europe continuing its ‘sluggish’ pace and the United States, which had outperformed, expected to slow (from 2.4% in 2023 to 1.2% in 2024).

Despite this, Coface raised its Country Risk rating for 12 countries, including 6 in Europe. Italy, which was downgraded in 2022, should be upgraded from ‘B’ to ‘A3’ in June. In terms of downgrades, only Israel’s rating has been lowered, for obvious reasons. In its other ranking, which looks at business sectors worldwide, Coface has upgraded the rating of seventeen sectors and downgraded five, reflecting cautious optimism following the recent crises.

As for the longer term, Jean-Christophe Caffet sees the current and future situation as the end of a cycle of strong growth and low inflation. There are a number of major challenges ahead, starting with the energy transition, “which is going to be very expensive in a higher interest rate environment.”