Global Economic and Currency Outlook amid Weakening US Dollar (USD)

Overview

Executive Summary

The global economy is undergoing a broad-based, more severe than projected recession. The prognosis is negatively impacted by the rising cost of living, the general tightening of financial conditions, US bank closures, Russia's invasion in Ukraine, and the ongoing COVID-19 outbreak. Global growth is expected to decline from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. Since 2001, this growth profile has been at its lowest.

Global inflation is expected to decline to 6.6% in 2023 and 4.3% in 2024, both of which are significantly less than the 8.8% experienced in 2022 but still higher than the levels of roughly 3.5% pre-pandemic. Consumer Price Index (CPI) data from OECD member nations show that annual headline inflation decreased from 9.2% in January '23 to 8.8% in February '23, with decreases noted in 23 of the 38 OECD member countries. The highest inflation rates were recorded in Hungary and Turkey, at 55.2% and 25.4%, respectively, while the lowest rates were recorded in Japan and Switzerland, at 3.3% and 3.4%, respectively.

Impact of Russia-Ukraine War: The global economy has been deeply affected by the Ukraine-Russia war. It has become a hindrance to the growth of all the sectors operating in the economy, shaking the financial markets. The COVID pandemic had already disrupted the global transportation system, and now with the invasion of Russia on Ukraine, the transport system is likely to be more affected. Sea Freight and road freight are the most impacted out of all other modes. In the global business scenario, both plays a major role contributing to the trade of goods. Almost all the European countries majorly depend on the Russian Energy, mainly gas. The surge in oil prices due to the disrupted supply chain are causing the global economy to shrink. Traders are finding certain alternatives in an already tight market. Russia and Ukraine produce 12% of world’s oil and 17% of its natural gas. The Ukraine- Russia war has impacted the supply chain. Due to the disturbance in the transport system and the ports there has been delayed supplies and bottleneck supplies to be delivered. This has led to decrease in supply as compared to the global demand, leading to increased prices.

Major Impacted Industries Due to Russia Ukraine War

• Aerospace, Defence & Security
• Automotive
• Consumers
• Oil & Gas
• Construction
• Agribusiness
• Semiconductor Industry
• Edible Oils

Impact of US Bank Closures

• Over US Economy: The bankruptcy of Silicon Valley Bank, the 16th-largest bank in the US, and the collapse of Signature Bank, which was followed by a dramatic drop in the price of Credit Suisse's stock, have sparked concerns about the security of depositors' money all over the world. In addition to destroying SVB's equity altogether, the current financial crisis has also weakened investors' confidence. Stockholders' value has also decreased.
• Over European Economy: European bank equities have been significantly harmed by the SVB crisis. The British government announced that SVB was purchased by HSBC for EUR 1.13. In a last-minute effort to safeguard the nation's technology sector and safeguard deposits worth more than EUR 7.6 billion, an agreement was achieved.
• Over Asia Pacific Region: The majority of financial institutions in the Asia-Pacific area, as opposed to Silicon Valley Bank, are less vulnerable to substantial losses from holdings of debt instruments and are less exposed to the failure of American banks. 
• Over Middle East Countries: The collapse of Silicon Valley and Signature are expected to have less impact on the majority of the rated banks in the Gulf Cooperation Council countries.

Performance of Currency by Region  

• North America: In North America, US Dollar dominates followed by Canadian Dollar. In recent years, the USD has been the strongest currency in North America, reflecting the dominance of the US economy and the US dollar's status as the world's reserve currency.
• European Union: The official currency of 19 of the 27 European Union member states is the euro (EUR), which is the second most traded currency in the world behind the dollar (USD).
• Asia Pacific: In Asia Pacific region the yuan has become the third largest reserve currency in the world, behind the U.S. dollar and the euro, as a result of increased foreign investment in Chinese markets. Despite the COVID-19 pandemic's negative economic effects, the Chinese yuan (CNY) performed rather well in 2020 when compared to other significant currencies.
• Middle East: The United Arab Emirates, one of the richest nations, uses the AED as its currency. Since the UAE is a significant oil exporter, the performance of the AED is highly correlated with the price of oil.
   

Makreo Research has published a study titled “Global Economy and Currency Performance Amid Weakening US Dollar”. This study covers performance of global economy and currency performance on regional level and it is the right blend of qualitative and quantitative factors. We have complied scattered information in a systematic format that has given a meaning to the market past performance. The report examines global economy performance including Global GDP, Inflation, Impact of US Bankruptcy, Impact of Russia Ukraine War and Currency performance. US Dollar currency performance with other currencies has been discussed in the report. Currency Performance by geography has been described mainly in three ways including regional distribution, distribution by major economies, and by emerging economies.

Segmentation Covered:

• Global Economy Performance
• Inflation
• Impact of US Bank Closures
• Impact of Russia-Ukraine War
• Currency Performance

Region Assessed

• North America
  • US Dollar (USD)
  • Canadian Dollar (CAD)
• European Union
  • Euro (EUR)
• Asia Pacific
  • Chinese Yuan (CNY)
  • Japanese Yen (JPY)
  • Singapore Dollar (SGD)
• Middle East
  • Emirati Dirham (AED)

Key Questions Answered

1. How Global Economy has performed in the past and what is the present scenario?
2. How US Bank closures impacted the nation and other regions worldwide?
3. What impact did Russia-Ukraine war left over the global economy?
4. What impact did Russia-Ukraine war left over the industries?
5. How US Dollar currency has performed in the past and what is the present scenario?
6. What is the future expected growth outlook of US Dollar?