"The Worst Is Yet To Come," Say Economists In FOREX.com's 2023 Macroeconomic Outlook

A string of macroeconomic events led to a global economic slump in 2022. FOREX.com’s 2023 Macroeconomic Outlook now shows that traders and investors can expect more of the same this year. 

“After the vaccine-driven burst of economic activity throughout 2021, hopes were high that 2022 would build on that momentum and return the global economy back to its long-term growth trend,” writes Matt Weller, Global Head of Research at FOREX.com. “As we all know by now, 2022 definitely did not follow that script.” 

From a macro perspective, the signs of the deceleration in economic growth were clear and plentiful. Russia’s invasion of Ukraine, global inflationary pressures rising as an aftershock to the pandemic and a series of lockdowns in the world’s second-largest economy (China) were all observable threats to global economic security. 

The consensus amongst economists at the International Monetary Fund (IMF), unfortunately, reflects a similarly negative outlook for 2023. “The normally staid economists at the IMF ominously warned that ‘risks to the outlook remain unusually large and to the downside… the worst is yet to come,” writes Weller. 

Glimpses Into FOREX.com’s “2023 Macroeconomic Outlook”

FOREX.com’s 2023 Macroeconomic Outlook report shows that the IMF expects global growth to decline to just 2.7% in 2023: 

As the chart shows, economic growth in the U.S. and Europe looks exceptionally weak compared to the rest of the world. “Looking at the U.S. first, declining real incomes and the lagged impact of 2022’s dramatic policy tightening may tip the world’s economy into recession,” writes Weller. 

“According to a recent survey from the Wall Street Journal, nearly two-thirds of economists expect the U.S. economy to fall into a recession at some point in the next twelve months.” Some investors have leveraged recent macroeconomic findings to hold onto their optimism for the economy in 2023. With inflation slowing, a relatively healthy job environment and the ISM Services PMI survey still solidly in positive territory, the current economic data is not consistent with ideas of a recession. Despite this, the data can change at any moment, leaving the U.S. vulnerable to economic shocks. 

“In Europe, the outlook is even more precarious,” continues Weller. “Beyond the obvious risks of the ongoing war on the Eastern front, the biggest concern is the large surge in energy bills, which have risen 400% to 1000% across the continent on depleted supplies. For that reason, the weather will be the most important ‘economic’ report to watch when gauging the outlook for the eurozone and the UK in the first few months of the year.” 

What Will The Future Of Inflation Look Like? 

According to Weller, price pressures were the dominant theme in 2022, leading to global changes in both monetary and fiscal policies. This pressure has influenced everything from interest rates and asset sales to taxes and government spending. 

The effect of these pressures, however, has not been uniform. Certain countries have felt the effect of inflation more than others and remain in a far more fragile condition than their counterparts. Additionally, some countries, especially in Emerging And Developing Asia and Sub-Saharan Africa, have improved their economies and may continue to do so in 2023. 

Above all, a disinflationary trend beginning in the late 1970s appears to be finally coming to an end. This, the author argues, could actually be a good thing, and embracing its end may actually be better for the world’s economies. 

“By starting with a top-down baseline view of how the global economy is expected to evolve in the coming year, readers can set baseline expectations for the market trends and themes to monitor,” concludes Weller. An educated view of the world’s macroeconomic conditions can help traders develop an edge and spot excellent trading opportunities. 

Want to know more? Click here to read the report in full and uncover all its findings.

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

Featured Photo by Adam Nir on Unsplash