After what was an extremely difficult year for the global economy, many of last year’s challenges remain in 2023. High inflation, European energy shortages and the threat of recession continue to provide a stern test to central banks around the globe.
Some areas of the global economy are doing well. The expanding gambling sector is thriving, helped by deregulation and improved technology, and there is increasing demand for both sports betting opportunities and trusted online casino portals.
In many sectors, however, the high costs of labor and the global economic uncertainty are causing significant problems. Preparing for future challenges is key to operating in this kind of environment. As 2023 begins, it is possible to make some tentative predictions for the year ahead.
Energy and Ukraine
The Ukraine conflict will continue to drive energy price increases, and this is likely to continue throughout the first half of 2023, but there is the possibility of a ceasefire.
If a ceasefire were to take place, there would still be economic penalties and voluntary embargoes; however, unless there is a major escalation, energy prices should not rise further, and in the near future, weakening global demand will restrain inflation. While the price of crude oil should fall through 2023, high costs of energy will continue to make it harder for central banks to tackle inflation.
Inflation challenges
Inflation will decelerate substantially in 2023 but fulfilling central bank objectives will be a protracted process. Downward price pressures are present, including a likely decline in grain prices, and lower agricultural commodity costs should trickle down to other sectors.
Nevertheless, labor shortages and pay growth are still fueling inflation, particularly in the services sector. It could take several years to get inflation rates close to central bank targets.
Interest rate adjustments
There is likely to be a continuation of the 2022 interest rate hikes around the world, particularly in the US and in Europe, where the European Central Bank (ECB) seems likely to continue the hiking cycle for the first quarter of 2023. The Bank of England may lag behind the ECB and the US, as fears of recession and other pressures conspire to give the Bank less room to maneuver.
In Latin America, however, we can expect some lowering of interest rates in 2023. In that region, central banks acted sooner than in Europe and the US to tighten policy and that has put them further along the road to controlling inflation, so it is likely we will see interest rates falling.
Asia-Pacific nations prevent recession
With both the US and Europe hovering on the brink of recession, it is likely to be the Asia Pacific nations that will help to prevent a global recession. This region is set to be the fastest growing part of the world over the next 12 months due to improving prospects for growth in China and expansion in several other key economies, such as India. At the same time, Australia, Malaysia and Indonesia will continue to benefit from high commodity export revenues. Global GDP growth may slow significantly, but Asia Pacific nations should help prevent a global recession.
Two-tier global growth
It is expected that emerging and developing economies (EMDEs) will continue to be resilient throughout the year, but pockets of economic vulnerability may lead to a two-tier path for growth.
The combined effects of rising interest rates in the world’s more advanced economies, together with the end of remaining Covid-19 stimulus and support measures will influence the economic fates of some EMDEs. Those nations that have higher debt burdens and slower policy responses, such as Zambia and Belarus, could be vulnerable in 2023, but this should not be widespread.
The Asia Pacific region has manageable debt levels and is in a stronger position than in previous economic crises, while debt restructuring is a more likely outcome than chaotic default for nations struggling with debt, particularly in the sub-Saharan region of Africa.
China’s rocky path to recovery
China has moved to ease its strict Covid-19 containment policies, but the immediate future for the world’s second largest economy is likely to involve considerable turbulence. The Chinese government will have to balance the public unwillingness to accept more containment measures with the risks of new outbreaks. Although financial markets will bounce back as the policy is unwound, the underlying economy will take a lot longer to recover and will require ongoing intervention from the government.
Summary
2022 was a tough year for the global economy and 2023 is set to be volatile, particularly through the first half of the year. There are positive signs, however, particularly in the Asia Pacific region and some optimism that the global economy will not tip into recession this year.
I am a journalist who writes about economics and business. I have worked in the news industry for over 5 years, most recently as an author at Global Happenings. My work has focused on covering the economy news, and I have written extensively on topics such as unemployment rates, housing prices, and the financial crisis. I am also an avid reader and have been known to write about books that interest me.
