16 minute read 20 Jan 2023
Aerial view of atumn forest road

2023 Global economic outlook: Transforming uncertainty into opportunity

Gregory Daco

EY-Parthenon Chief Economist, Strategy and Transactions, Ernst & Young LLP

Inclusive leader. Passionate about how economics can help organizations navigate an uncertain world. Husband and dad. Judo black belt, competitive triathlete and avid traveler.

Lydia Boussour

EY-Parthenon Senior Economist, Strategy and Transactions, Ernst & Young LLP

Focused on guiding leaders and organizations through economic changes. Avid traveler raising global citizens.

16 minute read 20 Jan 2023

Show resources

  • 2023 Global Macroeconomic Outlook: Transforming uncertainty into opportunity (pdf)

Business leaders should look to build resilience and remain growth-minded amid a volatile economic backdrop and looming global recession.

In brief

  • The 2023 global and US economic outlook is characterized by volatility and consensus slowdowns.
  • Our “Transforming uncertainty” paradigm discusses driving growth and adaptability across the themes of inflation and pricing, labor, supply chain, capital, and ESG.

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.

Show resources

  • Download the full 2023 Global Macroeconomic Outlook

 The five themes of our “Transforming uncertainty” paradigm

Click a theme below to discover more.


Businesswoman carrying briefcase
(Chapter breaker)

Theme 1

Inflation is present everywhere, but in different forms

Volatile global prices and costs, real wage and household spending power erosion, and global central bank monetary policy tightening.

Volatile global prices and costs, real wage and household spending power erosion, and global central bank monetary policy tightening create challenges and opportunities for businesses. Inflation persistence and volatility are likely to be key features of the outlook, especially in a global environment featuring increased fragmentation.

  • Pricing strategy

    • In an environment of elevated inflation volatility and slowing final demand, businesses may need to have a holistic pricing strategy framework.
    • This requires establishing a clear pricing strategy with defined objectives (margin vs. market share or premium vs. value), a data-driven and value-based pricing structure, and a monitored pricing executive strategy.


  • Cost management

    • Businesses may need to consider building a resilient and sustainable cost management approach to navigate a world where demand will ebb and flow more significantly than in the past few decades and where supply may be deficient.
    • Business executives need to understand the true cost to serve, including forward-looking up-front and hidden costs.
  • Efficiency

    • Productivity and efficiency gains should be central to companies’ holistic pricing strategy.
    • In addition to worker productivity, businesses may need to assess broader organizational structure, design and processes that impact overall business efficiency and cost base.

How EY can help

Strategy consulting

EY-Parthenon professionals recognize that CEOs and business leaders are tasked with achieving maximum value for their organizations’ stakeholders in this transformative age. We challenge assumptions to design and deliver strategies that help improve profitability and long-term value.

Read more


Young latino business woman
(Chapter breaker)

Theme 2

Talent attraction and retention are more important than ever

Labor markets remain tight, and businesses are competing for reduced talent pools.

Labor markets remain tight, and businesses are competing for reduced talent pools. Compensation costs have also grown. A labor market rebalancing is likely coming, but relative tightness lingers for now. A competitive labor market where the value of talent has risen and labor supply is constrained by aging and reduced immigration will put emphasis on talent resilience.

  • Talent resilience

    • In a labor environment that remains competitive, employers may need to focus on retaining existing talent and adapting to the changing job market landscape.
    • Strategies aimed at enhancing job quality and career paths, promoting a strong culture, and creating incentives can help boost talent resilience and lower employee turnover.
  • Value of talent

    • As wage and benefit costs continue to rise, high-quality talent is increasingly expensive to attract and retain.
    • Business executives may need to maintain a proactive and flexible approach to talent management, invest in talent development initiatives, and build and maintain efforts toward improving culture, diversity, equity and inclusion.
  • Productivity

    • To alleviate rising labor costs, companies can focus on increasing employee productivity to drive business efficiency and protect margins.
    • Harnessing new technologies, investing in employee trainings, and improving communication and collaboration across teams are some ways to improve overall efficiency.

How EY can help

HR transformation

The disrupted workplace presents a new opportunity for the HR function: to become a strategic partner to the CEO in influencing and executing business strategy. Are you ready for the challenge?

Read more


Man riding bicycle
(Chapter breaker)

Theme 3

Building supply resiliency amid fragmentation and volatility

Pandemic disruptions, geopolitical tensions and increased international fragmentation brought to light global supply chain vulnerabilities.

Pandemic disruptions, geopolitical tensions and increased international fragmentation have brought to light global supply chain vulnerabilities. Suppliers are on the watch for a “bullwhip effect” following product and labor shortages as well as geopolitical tensions. The pandemic and geopolitical climate have added momentum to the “slowbalization” trend. Business leaders will increasingly have to anticipate, react to and adapt to a transforming geopolitical and domestic policy landscape.

  • Logistics

    • Supply chains are challenged by geopolitical risks, elevated input costs, labor shortages and lingering disruptions from the pandemic.
    • Business leaders may need to assess their supply chain ecosystem, including the potential for diversification and substitutability, while remaining competitive and cost effective. 
  • Globalization

    • The era of relatively liberalized global trade amid ever-increasing globalization has likely ended for now. In its place is a transformed global operating environment where geopolitical dynamics are likely to impact business decisions.
    • Business leaders face a dichotomy; considerations of onshoring and localization of supply chains brought on by the pandemic vs. engaging a global supply chain network in pursuit of specialization and efficiency.
  • Geopolitics

    • The geopolitical landscape has been increasingly volatile in recent years, with US-China tensions and the rise of a variety of middle powers driving a shift from a unipolar to a multipolar world.
    • Policies aimed at preserving strategic independence or supporting strategic industries must form an integral part of business executive decision-making.
    • Rising populism and nationalism have also contributed to a weakening of multilateral institutions as governments have exerted more control over their economies.

How EY can help

Geostrategic Business Group

Political risks are creating both challenges and opportunities for global organizations, creating an imperative to develop more strategic approaches to managing political risk. The Geostrategic Business Group helps companies to do this by translating geopolitical insights into business strategy.

Read more


Residential building
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Theme 4

Adjusting to a higher and more volatile cost of capital

Financial market dislocations on the equity, fixed income and foreign exchange front require increased adaptability and foresight.

The cost of debt has surged to multiyear highs and is unlikely to return to pre-pandemic lows in the near term. Concurrently, a decline in valuations has led to a significant slowdown in M&A and PE activity. Additionally, amplified currency swings are being observed in developed markets with comparative stability in emerging markets. Financial market dislocations on the equity, fixed income and foreign exchange front require increased adaptability and foresight.

  • Debt

    • The rapid and synchronized tightening of monetary policy globally has led to a surge in borrowing costs that is unlikely to rapidly revert to pre-pandemic levels.
    • While executive pragmatism is a virtue in a highly volatile environment, current market conditions continue to offer opportunities, even if they require adaptability on the part of business leaders.
  • Equity

    • Several cyclical head winds, including rising rates, recession fears and tighter financial conditions, are constraining private equity and M&A activity.
    • Business leaders should continue to position themselves for long-term strategic growth by tapping new, diversified sources of capital (including private capital) to bolster operational capabilities and innovation.
  • Foreign exchange

    • Significant currency movements, especially across advanced economies, have translated into significant value and cost disruptions, representing risks and opportunities for business leaders.
    • A forward-looking, holistic valuation framework can help transform potential losses into opportunities, if well hedged. For example, a stronger dollar may constrain the value of US-based companies’ profits but offer profitable investment opportunities abroad.



Office building interior
(Chapter breaker)

Theme 5

ESG and sustainability “here and now,” not “maybe later”

Comprehensive approaches to sustainability often return more customer, employee, societal and environmental value than anticipated.

Comprehensive approaches to sustainability often return more customer, employee, societal and environmental value than anticipated. Business leaders who embrace value-led sustainability can help companies unlock more value from their climate actions.

  • Purpose

    • The last few months have brought about a sense of urgency in these developments. The war in Ukraine and the ensuing surge in oil, gas, primary commodities and food inputs have meant that, now more than ever, a focus on ESG and sustainability issues should be central to business strategy.
    • Businesses are increasingly focused on ESG and sustainability issues to create long-term value, develop a sense of purpose, and provide trust and confidence to the market.
  • Strategy

    • Business executives should manage ESG and sustainability performance with the same rigor as financial performance while integrating those elements into corporations’ business strategy.
    • Strategy should be viewed via a sustainability lens, using both top-down and bottom-up analyses, and assessing commercial and sustainable spend in the same way.
  • Costs

    • While inflationary pressures might delay some plans, businesses can also consider the current environment as an opportunity to accelerate the transition.
    • Judgments about a company’s sustainability performance affect talent acquisition and retention, access to capital, and consumer choices, while new regulations translate sustainability imperatives into economic costs that must be incorporated.

How EY can help

Sustainability and ESG strategy services

EY teams can help you create long-term sustainability and ESG value through strategy, M&A, capital allocation, ESG due diligence and portfolio optimization.

Read more

Sector considerations vary in the current global economic outlook

  • Advanced manufacturing and mobility

    • Inflation: Wild swings in transportation, input, storage and labor costs along with the risk of lost sales and excess or insufficient inventory can have a profound impact on margins. Businesses with an integrated pricing framework can gain competitive advantage by preserving or even winning additional market share.
    • Labor: The supply of skilled workers in the manufacturing and mobility space has been restrained in the post-pandemic environment, thus limiting growth potential. This extends to transportation and logistics roles. Business leaders should assess their labor needs over the next 18 months with a view toward building long-term resilience in a tight labor market.
    • Supply: The advanced manufacturing and mobility sector is likely to continue facing volatile supply conditions in the coming years. Business leaders will have to balance the desire for insulation from global risks with the benefits from a globalized environment and political developments favoring the development of some strategic sectors.
    • ESG: The advanced manufacturing and mobility sector has a disproportionately higher carbon footprint, requiring a conscious effort by business executives to consider strategy via a sustainability lens.
  • Consumer products and retail

    • Inflation: More than ever, brands are investing in ways to develop stronger consumer relationships. Companies that can continue to find ways to anticipate consumers’ needs and improve the buying experience are likely to fare better in downturns. Creative use of technology can be a key differentiator in a volatile inflation environment.
    • Supply: Supply chain disruptions in the consumer sector have contributed to delayed deliveries and heightened inflation. In a volatile geopolitical environment, business leaders may need to maintain end-to-end supply chain visibility to help drive enterprise growth and manage costs. Food supply and security will be a key focus in the context of elevated inflation, climate change and geopolitical volatility.
    • Capital: Consumer product companies and retailers should explore opportunities to expand footprints in high-growth markets, taking advantage of the newly defined cost of capital environment. Business executives should consider value-led, sustainability-driven growth opportunities as well as divestitures or spin-offs to generate new value.
    • ESG: Consumer-facing companies can play an active role in building a sustainable future, but no company can do what’s needed on its own. To make a big enough difference fast enough, organizations must work closer together in ecosystems that balance the needs and interests of all stakeholders.
  • Energy and resources

    • Inflation: Elevated volatility in energy prices will push many upstream and downstream energy businesses to re-evaluate their exposure to swings in supply, demand and prices of energy. Geopolitical tensions and cooling global final demand should be central to a resilient building strategy.
    • Supply: Reliability of energy supply, affordability and environmental sustainability will be central for business executives in the energy sector. The drive for energy security and strategic independence is likely to create growth and investment opportunities for companies across the upstream and downstream energy sectors.
    • ESG: The energy sector stands at the confluence of risk and opportunity when it comes to ESG and sustainability. A proactive, forward-looking vision that anticipates the constants as well as the change will be a key to success for energy producers, downstream sectors and utilities.
  • Financial services

    • Labor: The labor market remains very competitive in the finance, insurance and professional businesses sectors, driving upward pressure on costs to employers, including wages and benefits. Finding balance in terms of hybrid work environment offerings, productivity and mobility will be key for businesses to retain talent. Digital transformation should be at the forefront of the effort to reduce the burden from elevated compensation costs.
    • Capital: A more volatile and uncertain global economic and financial market backdrop has led to a pullback in private equity and M&A activity. Business leaders will increasingly focus on long-term value while focusing on innovation and tapping into new sources of capital.
  • Government and public sector

    • Labor: Talent resilience will also be key in the government and public sector with an increasingly dominant focus on energy and food security, inflation management, and geostrategic considerations.
    • Supply: The US, EU and mainland China will continue to develop their sphere of influence while framing economic competition in strategic terms. These include the EU digital agenda, CHIPS and IRA legislation in the US, along with export controls in the US and mainland China’s “Way Forward".
    • Capital: In an environment of elevated interest rates, the cost of debt (servicing) will continue to rise and the appetite for fiscal policy stimulus will be limited. Still, governments around the world will look to support initiatives aimed at providing inflation relief along with energy and food security and strategic independence.
    • ESG: The regulatory environment around climate continues to evolve rapidly. The Securities and Exchange Commission (SEC) will finalize its climate-related disclosure rule, the European Parliament has formally adopted the Corporate Sustainability Reporting Directive, and the International Sustainability Standards Board (ISSB) works toward finalizing global climate-related and general sustainability disclosure standards. These changes steepen the learning curve for business leaders.
  • Health sciences and wellness

    • Inflation: Life sciences companies will likely continue to face an environment of volatile input costs and production prices. While some sectors may be less exposed to final demand swings, structurally deficient labor supply, the increasingly strategic nature of pharmaceuticals and medical devices, and the evolution in insurance pricing may require increased monitoring.
    • Labor: Labor supply has remained structurally constrained in the health sciences and wellness sector with acute shortage for skilled workers in nursing, social and home care. Business leaders can assess a company’s strategy around total compensation, upskilling and retention and focus on long-term talent strategy.
    • Supply: COVID-19 has put a spotlight on critical medical, personal protective equipment and pharmaceutical supply chains. Onshoring has become a hot topic in these spaces, as domesticating supply chains for such critical goods is seen as a matter of national security and public safety.
  • Private equity

    • Labor: In a competitive labor market, organic growth of private equity assets can be restricted by the availability of qualified and available workers. Asset transactions can impact labor force retention, complicating the situation further.
    • ESG: As ESG increasingly becomes core to the private equity value creation narrative, ESG indicators will need to be of the same veracity as financial figures to instill confidence that the insights they deliver are equally trustworthy and actionable.
  • Real estate, hospitality and construction

    • Inflation: Low affordability due to elevated prices and surging mortgage rates will continue to constrain housing activity — both demand and supply. Commercial real estate will have to navigate a period of readaptation where hybrid work, an increased focus on affordability, the digital economy and ESG (environmental, social and governance) will drive decisions.
    • Supply: Historically low affordability is contracting housing market demand, even if there continues to be a lack of supply. Constrained supply of labor, land and lumber will remain a head wind, even if the multi-family sector construction pipeline remains historically high. Elevated cost pressures and rising interest rates will also pressure the commercial real estate sector.
    • Capital: Rapidly fluctuating asset prices along with a higher cost of debt will represent a head wind for the real estate sector in 2023, but they also offer up opportunities for business leaders with medium-term value-generation expectations.
  • Technology, media and telecommunications

    • Labor: Talent management in the technology, media and telecommunications sector will require a delicate balance between the pressure to quickly bring technology-enabled products and services to market and the desire to drive long-term financial, human and environmental value creation.
    • Capital: The rapid swing in valuations and significant valuations gap will constrain growth in the tech sector after a very strong post-pandemic recovery. Still, the market typically rewards companies who focus on revenue growth during periods of recession, and now may be an opportune time for business leaders to consider strategic deals, as many acquirers are sitting on unprecedented levels of cash.

Dan Moody of Ernst & Young LLP contributed to this article.


In the face of an uncertain economic environment, business leaders should seek opportunities to grow. Business executives may do so by building resilience and adaptability to a new paradigm of uncertainty. It is critical for leaders to be proactive and discover how to turn potential pitfalls into new prospects.

About this article

Gregory Daco

EY-Parthenon Chief Economist, Strategy and Transactions, Ernst & Young LLP

Inclusive leader. Passionate about how economics can help organizations navigate an uncertain world. Husband and dad. Judo black belt, competitive triathlete and avid traveler.

Lydia Boussour

EY-Parthenon Senior Economist, Strategy and Transactions, Ernst & Young LLP

Focused on guiding leaders and organizations through economic changes. Avid traveler raising global citizens.