ShareWASHINGTON: Russia's invasion of Ukraine, surging inflation and the end of the worst of the COVID-19 pandemic all dramatically shaped 2022. But what might the next year bring?
The war in Ukraine dealt a heavy blow to global stability, the shockwaves of which affected energy prices, inflation, food security and changed the dynamics of international politics. All the while, people struggled with rising costs of living and another recession is said to be on the way next year.
Businesses are being advised to prepare for prolonged disruption and volatility. Even billionaires, who typically escape unscathed, are expected to see a drop in their net worth over the next 12 months. Here, The National looks at some of the major events of 2022 that will have lasting effects in 2023.
War and nuclear threat
The consequences of Russia's invasion of Ukraine continue to reverberate around the world, causing an energy crisis in Europe, amid suggestions of a new Cold War. Global instability has rarely felt so fragile, with the US and an emboldened NATO increasingly clashing diplomatically with Russia on the world stage.
Sweden and Finland have applied to join NATO and the number of high readiness forces has jumped from 40,000 troops to 300,000. No one is sure what Russian President Vladimir Putin will do next. He has threatened to use nuclear weapons, attacked civil nuclear power stations and falsely accused Ukraine of possessing bioweapons.
In 2023, while the West is being urged to continue its commitment to Ukraine by supplying greater military hardware, Moscow's nuclear brinkmanship will be a continued focus. Washington will try to restart nuclear negotiations with Moscow and will also try to engage Beijing.
Iran's nuclear capabilities also remain a concern, and North Korea's nuclear weapons program is a growing threat. Experts at Chatham House pose the question: Will 2023 be the year of nuclear conflict or the year when states get serious about non-proliferation and disarmament?
China remains a conundrum. Will it try to gain leverage and influence while the US is preoccupied with Russia. What role might it play in that war? And what about strained relations with Washington that manifest themselves in rivalry in the Pacific. Domestically, will COVID-19 restrictions continue to be lifted a move which would turbo-charge the world economy. The severity of its zero-COVID policy led to protests across the country.
The US is beginning to recognize China as both a military and economic adversary with growing global influence. The war at the moment is being fought over technological innovation. Last year, China's President Xi Jinping said this has become the main battleground of the global playing field. That won't stop in 2023.
Recession looms
The global economy continues to be buffeted by several shocks such as the Ukraine war, financial woes, interest rate rises, and the immediate aftermath of the pandemic. Taken together, these have prompted fears of a worldwide recession in 2023 and the expectation in some quarters of stock market crashes. Experts from the likes of Goldman Sachs, however, do not entirely share the pessimism. They predict growth will be at a below-average trend of about 2 per cent and the US will come into a soft landing. "There are strong reasons to expect positive growth in coming quarters," said Jan Hatzius, head of Goldman Sachs Research and the company's chief economist, referring to the expectation that real disposable incomes will rise by more than 3 per cent.
However, businesses should be prepared for continued volatility in the years ahead with a prolonged period of disruption and uncertainty. In the short term, the global economy is by most matrix weakening rapidly. The US and Europe are forecast to experience recessions in the very near term and China after the lifting of COVID-19 regulations will record significantly weaker growth in 2023.
The ageing workforce across many mature and large emerging market economies will have a material dampening effect on growth. Sub-Saharan African economies and emerging Asian economies seem best placed to continue to outperform the global average pace of growth. Now the economy is beginning to look much different. Demand is slowing, supply chains have recovered, the pandemic has subsided and unemployment benefits have normalized. The expectations for short-term inflation are still relatively high, but much of this probably reflects the surge in commodity prices and should wane if those prices level off. There are already signs in the US that this is happening.
The key to it all could well lie with China where recovering consumer consumption could lead the economy to a modest recovery next year. "We're forecasting 5 per cent growth in 2023, with most of that coming in the second half of the year, when the economy is expected to fully reopen following the repeal of COVID-zero policies early in the year," said Robin Xing, chief China economist at Morgan Stanley.
Billionaires may take a hit
Even for the world's billionaires - there are 2,668 of them, according to Forbes - times can be tough, and 2023 doesn't look like being any better for the planet's financial titans, many of whose fortunes are wrapped up in big tech. Take for instance Elon Musk, who bought Twitter and, in doing so, saw his wealth, much of it tied up in his Tesla stock, nosedive to $168.5 billion, according to the Bloomberg Billionaires Index. He is no longer the world's richest person. - Agencies
