Albawaba - Over the past year, the world has grappled with soaring prices and global inflation. The cost of living is on the rise and millions are trying to survive amidst tightening financial conditions. And, with the war in Ukraine continuing with no sign of it abating, many are anxious what lies in store in 2023.
While global inflation skyrocketed throughout the year, experts suggest it will fall to 6.2 percent in 2023. However, slow economic recovery will impact businesses as consumer gains are significantly less than market prices. Increase in interest rates will also push for more debts.
This comes to show that even though global inflation might decrease next year, there are risk pointers indicating that the world will still be facing economic uncertainty.
Global inflation is proving to be broader and more persistent than we anticipated. We expect it to peak at 9.5% this year before slowing to 4.1% by 2024. https://t.co/SnntPSlwet #IMFBlog pic.twitter.com/XR350Vji8G— IMF (@IMFNews) October 14, 2022
Stock and crypto markers
The unstable and jittery stock and crypto markets continue to impact the forecasts for next year. According to Fitch, forecasts for world GDP growth decreased by 2 percent over the course of only three months. In fact, Fitch now expects a 1.4 percent increase in world GDP for 2023, compared with a 1.7-percent growth, which was expected during the September Global Economic Outlook (GEO).
The decrease in 2023 growth forecasts also impacted the expected growth for both the U.S. and China from 0.5 percent to 0.2 percent, and 4.5 percent to 4.1 percent, respectively.
Additionally, the U.S. is also facing challenges with its dollar index and stocks declining.
But what does that mean to other leading currencies?
The U.S. dollar is one of the strongest currencies worldwide, however, many are speculating whether market instability can be the downfall for it. In fact, investors are expecting the Yen to come back stronger after it dropped significantly to 150 against the U.S dollar.
But the expectations of the Yen emerging as a strong currency in 2023 largely depends on strong market intervention from the Japanese government and the Bank of Japan, as well as the Fed slowing down with rate increases in the U.S.
Furthermore, the change of leadership that the Bank of Japan will see in April is also heightening speculations on whether there will be any changes on bond yields that might help strengthen the Yen.
Meanwhile, the U.S. economy is expected to face economic constraints in 2023, Morgan Stanley suggests that China’s GDP will increase by 5.4 percent next year. This is largely because China aims to prioritize its economic growth this coming year. Not only that, but it is also reported that Russia wants to start buying Chinese yuan on the currency market as opposed to the U.S. dollar.
Following the Russian-Ukraine war and the Western and U.S. sanctions imposed on Russia, the Russian government is shifting to become more dependent on the Chinese yuan and in return pushing for de-dollarization.
However, the reports also state that this transition into the Chinese market depends on whether Russia's oil and gas revenue matches the country’s expectations.
On the other end of the spectrum, economists are also speculating what the cryptocurrency market will look like in 2023. In a volatile and uncertain market, cryptocurrencies have become a grayer area following the FTX scandal. But what makes crypto stocks appealing for many is that you can never know what to expect.
"This time next year, Bitcoin could be trading at $5,000 or $50,000 and neither would be a total shock, seeing as the market is almost exclusively driven by sentiment," said Laith Khalaf, head of investment analysis at AJ Bell.
"Looking further out, the longer term adoption of crypto by consumers, businesses and investors is deeply uncertain, and that makes the underlying assets highly speculative," he told Albawaba.
While there are several speculations on what to expect next year, there is a greater uncertainty on what lies ahead in such tumultuous and uncertain times.
© 2000 - 2023 Al Bawaba (www.albawaba.com)