The global economic picture is mixed heading into 2023, depending on the region, but the long-simmering slowdown will likely turn into a global recession in 2023.
In the US, the economy is visibly cooling because of persistent inflation, rising borrowing costs, deteriorating private sector morale and rapidly slowing global economic activity. We believe elevated inflation and a lingering energy crisis will lead to a moderate recession in the Eurozone. In the UK, double-digit inflation and elevated interest rates will significantly constrain consumer spending over the course of 2023. In Japan, the improving health situation and easing supply chain disruptions led to greater consumer spending activity and rebounding business investment in the fall. In mainland China, the economic outlook remains uncertain, with growth constrained by the recently lifted zero-COVID-19 policy, a lingering property sector downturn and weakening global trade activity. Among emerging markets, economic activity is constrained by high inflation and tight monetary policy along with slower growth across advanced economies.
Gaining resiliency as macroeconomic volatility persists
While there is a consensus around a mild recession view, we shouldn’t forget that the profound COVID-19 shock to the global economy and the rapid fiscally stimulated recovery have left a trail of imbalances that will lead to more persistent macroeconomic volatility. If the pandemic has taught us anything, it’s that economic activity is rarely linear. Shifts in supply, demand and policy can be abrupt and will force a proactive and nimble business strategy approach.
Rather than allow the economic environment to dictate business decisions, business leaders should seek opportunities to grow. Business executives may do so by building resilience and adaptability to this new paradigm of uncertainty. More than ever, it’s important to be proactive and seek a better understanding of the outlook and discover how to turn potential pitfalls into new prospects.