Vol 20 (2023) - Issue 2

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Can We Get (Green) Growth?

Synopsis
For the global macroeconomy, the outlook for 2023 has been modest. A 'cost of living crisis' brought on by high inflation, rising energy prices and rising interest rates is dampening demand. Supply factors are being addressed in the US and in Europe by fiscal measures to support green(ing) industries, which consist in regulation and tax incentives. The medium-term outlook of these domestic or regional measures on the macroeconomy is still in question, provided the potentially inflationary impact from decoupling suppliers from local value creation. Yet the green policy support being introduced by governments is one of the reasons the International Monetary Fund (IMF) now guides that global growth will 'bottom out' in 2023, and we will see recovery begin toward the end of the year. Other reasons include the better-than-expected adaptation to the energy crisis in Europe, among other things.
In the short term, corporates navigate a volatile, late business cycle market. First order of business is to deliver profitability, to be able to grow further later.
Business seeks to do so in a more volatile market than the 'OECD century' market that lasted until 2019.
The current market outlook is characterised by shifting geoeconomics, higher likelihood of economic and market shocks, and rising cost of funding.
This article reviews three levers corporates are pulling to address the current economic outlook. First, they are increasing use of scenario planning and attempts at market timing. Second, there are efforts to boost profitability fast, in order to grow later. Third, corporates are working hard to take advantage of the opportunities provided by the green industrial and financial policies.