Geopolitics and the global economy

In 2023, around the world, demands are accelerating to reform the financial, commercial and fiscal systems to promote more effective actions against climate change. For both Europe and the United States, the energy transition is not only an environmental policy, it is also a strategy to reduce their dependence on the countries of the East.

For this year, what happens in the geopolitical arena, and even politics in many nations, will determine what happens with the economy, with growth and with prices. Inflation will definitely be lower in most nations, but it will remain high, the pace of rate increases by central banks will slow down, but they will hardly come down this year. High rates will accelerate problems in over-indebted countries in regions like Africa and Latin America. In this scenario, global economic growth is expected to be less than 2.7, predicted by the International Monetary Fund. The covid will still be a present issue during 2023, with still negative economic, but above all commercial and logistical consequences, which will continue to put pressure on prices on the supply side. The reopening of China, as part of its new covid strategy, will eventually reactivate its economy, but that may take time, partly due to the low effectiveness and coverage of its vaccines that will lengthen the health crisis, which could also generate new conflicts. and harden the regime. Tensions between China and the West over the Taiwan issue will continue, which does not help on the trade front either. In general, the “approach” policies will be accelerated during the year to reduce the dependence of the United States on Chinese suppliers.

Russia’s invasion of Ukraine will not end in 2023, there will be neither an agreement nor a winning side, so the conflict will continue to determine much of what happens in the global economy, due to problems in the supply of grains, which have an impact on prices, but, above all, on the energy issue. The need to have resources to support Ukraine, its defense and reconstruction, will generate financial pressures in Europe and tensions between the members of the union and the United States regarding this financing. The economic crisis may be particularly severe in Germany, the nation most dependent on Russian energy inputs. The energy issue could even worsen due to internal protests in Russia itself. Nor is it clear what will happen to other countries that are key in energy provision, such as the Erdogan regime in Turkey, which will have elections this year, or in Iran with serious social problems.

In 2023, around the world, demands are accelerating to reform the financial, commercial and fiscal systems to promote more effective actions against climate change. For both Europe and the United States, the energy transition is not only an environmental policy, it is also a strategy to reduce their dependence on the countries of the East.

It is expected that for this year the tendency for developing countries to count as new sources of income and with the implementation of concrete actions to reduce coal consumption, with technology transferred from more advanced countries, will accelerate. However, the recessive and inflationary global climate may reduce the real possibilities of investment in the matter during the year. As inflation will continue to be present, the more intensive use of materials such as recycled materials would have to be postponed so as not to raise the prices of the products.

As we can see, the global economic outlook is very complex and will be determined based on global geopolitical conditions.

Twitter: @vidallerenas