Looking ahead at 2023 and beyond, it’s clear that the global economy will continue to navigate some of the most challenging of times.
According to the IMF’s World Economic Outlook, released in October 20221, “global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades.
“The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering Covid-19 pandemic all weigh heavily on the outlook,” it says.
The report says that global growth is forecast to slow to just 2.7 percent in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the pandemic. Global inflation was predicted to peak in 2022 but then decline to 6.5 percent in 2023 and 4.1 percent by 2024.
Commenting on HSBC’s Business Balancing Act study, Barry O’Byrne, CEO Global Commercial Banking at HSBC, says businesses are operating in an increasingly complex global economic landscape, navigating a wide range of challenges from soaring inflation to rising interest rates.
“Despite this, there is a strong sense of global resilience and ambition amongst mid-size businesses as they zero in on growth in 2023,” he says.
MMEs are facing a balancing act between finding opportunities to drive growth and managing a combination of challenges in the year ahead.
“Our study shows that they are also looking to expand into new markets, improve sustainability and launch new products. New technology and access to finance are expected to be the twin-engines of growth for businesses in the short and long-term,” says O’Byrne.
Here in New Zealand, in the latest 2Degrees Shaping Business Study the frustration of business owners was clear.
The 2022 report highlighted labour shortages as the number one challenge for 53 percent of respondents, which is a departure from the normal key concern of cashflow and a reflection of the need to pay good wages in order to retain top people.
The study also found that Kiwi employers believe technology can improve their business. Nearly one-quarter of businesses said they lacked digital skills but wanted to improve, and 34 percent would like to upskill but didn’t have the time.
Another finding is that productivity remains New Zealand’s greatest business challenge. However, digitisation may well be the key to solving it.
Supply chain disruption
Structural changes in supply chains, triggered by geopolitical tensions, new technology and changing consumer behaviour were evident before the pandemic. But Covid-19 caused prolonged, episodic disruptions: first the initial lockdown of manufacturing capacity, then mixed and volatile demand patterns, and extended logistic interruptions impacting the movement of raw materials and finished goods.
While the structural changes are largely irreversible, pandemic-linked disruptions have now eased. Supply chains, while still not back to pre-Covid normal, have certainly improved in more recent months and the significant backlog of orders has eased.
At HSBC, we can help businesses navigate disruption by:
• Supporting a company’s suppliers earlier in the working capital cycle through provision of pre-shipment finance.
• Developing multi-tier supply chain finance capabilities to ensure financing is accessible to end suppliers and address points of failure.
• Mitigating risks as companies deal with new counterparties and build resilience in their supply chains by diversifying geographically and nearshoring through solutions like Documentary Credit (DC).
• Funding higher inventory levels as companies transition from ‘just in time’ to ‘just in case’ to manage contingencies, through asset-based lending.