Looking back and gazing ahead

THE YEAR 2022 has largely been a year of uncertainty as much of the world continued to grapple with the social and economic impacts of climate change; the fallout from Russia’s invasion of Ukraine; food insecurity and energy volatility. 

There were also some positive developments as we finally saw most countries lift the restrictions which had been put in place to combat the COVID-19 pandemic. Since then, there has been an uptick in travel, tourism and the emergence of a new normal in areas such as hybrid modalities for work and study. 

However, according to the World Bank, even as an unstable and uneven economic recovery from the pandemic took form in 2022, global development faced a crisis.

The Bank observes that slowing growth contributed to a reversal of progress on the global poverty agenda and an increase in global debt.

So what do we have to look forward to in 2023? Several analysts have assessed that the global economy is already at a tipping point and in 2023, they predict a global recession, albeit one that is mild and short.

The World Bank has warned that the three largest economies — the United States (US), China and the euro area — are “slowing sharply”. Meanwhile, the World Trade Organization (WTO) has conceded that “The picture for 2023 has darkened, and the International Monetary Fund (IMF) has stated that “The worst is yet to come”.

Furthermore, a survey of global business leaders has resulted in 86% of CEOs detecting a recession on the 12-month horizon. 

If there is one bright spot, unlike the recession associated with the 2007/2008 global financial crisis, analysts expect any recession in 2023 to be short lived. According to
Stéphane Monier, Chief Investment Officer, Banque Lombard Odier, the comparative strength of today’s banking and corporate sectors, combined with a healthy labour market suggest greater resilience compared to 2007/2008.

In the US, many eyes will be on the housing market, where there is expected to be a sharp decline in demand for home-buying. Home sales and prices have been on a downward trajectory in America, falling for a 10th straight month in November, according to a report from the National Association of Realtors.

The soft housing market is not only a problem in the US. House prices are also falling in more than half of the 18 advanced economies tracked by the consultancy firm Oxford Economics. These include the United Kingdom, Germany, Sweden, Australia and Canada. China’s housing market has also been wobbly for a while now, meaning that the world cannot look to China to balance the adverse conditions elsewhere.

Housing market woes will likely be a drag on the global economy in 2023. According to Oxford Economics, in a worst-case scenario, world Gross Domestic Product ( GDP) will expand by a mere 0.3% in 2023, rather than the 1.5% currently predicted. 

The uncertainty of the past two years will likely carry over into 2023. Geopolitical cracks may widen; economic conditions will likely remain depressed; inflationary pressures may persist; and food and energy insecurity are likely to linger.

Globalisation is also under considerable strain. 

However, the work required to build resilient systems nationally to cope with global shocks must not cease. Bold action will be required in areas such as green growth initiatives; promoting industrialisation; strengthening social safety nets; boosting food security and pursuing more deliberate crisis preparedness. 

In the uncertain environment ahead, businesses, as well as the public sector, will need to adopt a holistic approach to managing risk at all levels of the enterprise or sector. This can place them in a better position to anticipate the impact that global risks could have on their strategic goals and consider the full range of options at their disposal.

Joel K Richards is a Vincentian national living and working in Europe in the field of international trade and development.
Email: joelkmrichards@gmail.com