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Increasing geopolitical risks, deglobalization, and fracturing payments systems among other macroeconomic forces will dictate global money flows, likely push the world toward a new economic order and stoke further crisis in the cost of living in 2023, financial markets analysts have predicted.
According to the analysts at Deloitte, these forces will determine how, where and when capital and liquidity are demanded; and the ways every actor in the financial system interacts with one another leading to an array of possibilities for the global economy in 2023, ranging from a quick return to normalcy to a prolonged global recession/stagflation.
“No matter when and how the war in Ukraine ends, the ramifications for energy production, global trade, capital flows, cross-border payments, and supply chain finance will be enormous, affecting how and what banks do to collectively support and engage with economic agents globally,” Deloitte stated in its report titled “Financial Markets Outlook 2023.”
While pointing out that the financial industry is about to be tested again after the COVID-19 pandemic tested banking leaders’ convictions, the investments and financial markets experts advised that banks should reassess traditional product, service, and industry boundaries to create new sources of value.
“Such opportunities may exist in a number of areas, including embedded finance, tokenized assets, financial technology, digital identity, or green finance. Some banks have begun this journey, but many could fall behind..… ..The pandemic tested banking leaders’ convictions, and it is about to be tested again. Nonetheless, banks should not lose sight of their role as financial intermediaries in the new global economic order,” the report stated.
Given the contribution of Russia-Ukraine to global food supplies, the conflict between both countries introduced new risks to the inflationary pressures, worsening the supply chain constraints and resulting in a spike in food and energy prices across the developed and developing economies.
Consequently, some countries introduced export bans to limit price shocks in their respective domestic economies. Global central banks aggressively tightened monetary policies faster.
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“Thus, as the central banks in advanced economies keep raising key policy rates, we expect growth to falter and turn negative in H1-23. Indeed, the IMF forecasts that 31 out of selected 72 economies will experience a contraction in real GDP lasting for at least two consecutive quarters at some point during 2022 -2023, amounting to more than one-third of world GDP,” analysts at Lagos-based Cordros Capital wrote in an emailed report on the outlook of the global economy.
They noted that given high uncertainties concerning the global macroeconomic and financial environment, striking a balance between avoiding a disorderly tightening of financial conditions and containing the potential threats will be critical as we head into the 2023 full year.
“Overall, our outlook for the global economy is a slowdown compared with 2022E growth levels. On the one hand, we expect to see the impact of monetary policy tightening on global household demand and private investment conditions, weighing down the overall growth in 2023.
“We expect prices to remain significantly above pre-pandemic levels, further pressuring consumer wallets and slowing household consumption. On the other hand, the slowdown in China primarily because of the lingering property sector woes and stifled domestic consumption will negatively impact other countries’ external sector conditions, given the roles played by China in global trade. Equally, the lingering Russia-Ukraine conflict is also expected to contribute to the expected global economy’s pervasive slowdown in 2023 full year,” the experts predicted.
The IMF expects global economic growth to slow to 2.7 percent in 2023 full year, down from an expected 3.2 percent growth rate in 2022. But in their report, the analysts at Cordros Capital have projected a 3.02 percent growth for the local economy.
BADEJO ADEMUYIWA has 23 years experience as a Finance Writer, specialising in Insurance and Investigative Reporting.
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