A downturn in 2023? Well, that depends on your location
According to the Chief Economists' Outlook of the World Economic Forum, the economic outlook for 2023 will feel different depending on where you are in the world.
Even though the world as a whole is in a bad place and almost 20% of respondents now think a global recession is very likely, which is double the number from the last survey in September, there are big differences between different places.
Most chief economists think that growth will be moderate or strong in the Middle East, North Africa, and South Asia. However, more than nine out of 10 people think that growth will be slow in the US and Europe.
In the Forum's economic briefing, leading chief economists from the public and private sectors share their thoughts and expectations. This survey was done in November and December 2022. Since then, the World Bank has said that there will be a global recession in 2023. They expect the GDP to grow by 1.7%, which is the slowest rate outside of the recessions in 2009 and 2020 since 1993.
Fear of a recession: Europe isn't doing well.
The Forum's report said, "For Europe, this is likely to show the growing effects of the ongoing war in Ukraine as well as the effects of sharp increases in interest rates." People also thought that tightening monetary policy would hurt the US's growth prospects.
The International Monetary Fund (IMF) recently revised its forecasts, which resulted in a 0.2 percentage point reduction in the outlook for global growth and a significant change in the outlook for the eurozone, which went from 1.2% to 0.5%.
The IMF thinks that world growth will slow from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the slowest growth rate since 2001, excluding the global financial crisis and the height of the COVID-19 pandemic.
On the other hand, people thought that the Middle East, North Africa, and South Asia did the best. Some economies in that part of the world, like Bangladesh and India, were thought to benefit from a trend away from China.
The report says that policymakers have to make hard decisions because of this diversity and the fact that growth is still slow and inflation is still high. The most important goal of monetary policy is to bring inflation down without slowing growth.
Difficult dilemmas
The report says, "Policymakers are in a tough spot because they don't know how much or how little to tighten." "Financial policymakers also face big problems, not least because the government spent a lot of money during the pandemic, leaving them with much less money to spend."
Even though the outlook is mostly bad and uncertain, there are some possible bright spots. Inflationary pressures, for example, could ease, and consumer sentiment could stabilise and improve.Even though the cost-of-living crisis is still big and will affect a lot of people, 68% of the people polled for the report said it will get better by 2023.
"There is a big difference between what high-income and low-income countries expect to happen to food prices," the report said. Rising food prices will hurt low-income countries the most, and many more people will be hungry as a result.
Business challenges
Businesses were expected to have the most trouble in 2023 with low global demand, high borrowing costs, high input costs, and a lack of skilled workers.
People continue to think that geopolitical trends are the most important thing that will affect the global economy in the coming year.
"This wider economic effect ripples through trade, investment, labour, and technology flows, presenting businesses with a wide range of challenges and opportunities," the report said. "On the other end of the spectrum, the fall of the cryptocurrency market isn't likely to have a big effect on other financial markets, and most chief economists don't think COVID-19 will cause any more problems for the economy."