Geopolitical tensions to continue shaping 2023 economy: S&P Global

Dive Brief:

• The COVID-19 pandemic, the Russia-Ukraine conflict and different geopolitical shocks will continue to impression the worldwide economic system into 2023, in accordance to an S&P Global Market Intelligence Report launched Tuesday. 
• The report, A World Rebalancing, outlines 5 overarching themes that can form financial coverage in 2023: unresolved conflicts, vitality safety, easing provide chain disruptions that can stay weak to labor and useful resource shortages, transitioning labor markets as demand overruns provide and certain recessions in each Europe and North America. 
• “The checks forward are interconnected and have huge industrial impression,” mentioned Lindsay Newman, head of geopolitical thought management at S&P Global Market Intelligence in an announcement. In this new period of uncertainty and instability, “companies and markets could have to navigate sanctions, enhance protectionism, authorities interventions, different fee programs and reputational threat,” she mentioned. 

Dive Insight:

Earlier this yr, many CFOs had a dim outlook on financial situations in each North America and Europe within the wake of looming geopolitical situations and rising inflation. Now, that dim outlook is carrying over into 2023, in accordance to S&P Global, as geopolitical tensions continue to create rifts in macroeconomic situations. 

”A key takeaway from 2022 is the extent to which the chance setting has formed the financial outlook. We will enter 2023 with quite a lot of conflicts and competitions unresolved and sources of threat,” mentioned Newman.

The ongoing Russia-Ukraine conflict in addition to different unresolved dangers will persist into 2023, filtering into the worldwide financial outlook, in accordance to the survey. 

“Despite the disparate pandemic expertise, going into 2022 there was hope that we might see a linear financial restoration. Russia’s invasion of Ukraine to begin the yr shortly and profoundly modified the trajectory of the yr forward,” mentioned Newman in an emailed response to questions. “Looking forward to 2023, finance leaders can put together for extra volatility fairly than much less,” she mentioned. 

Economic and safety spheres will turn into more and more interdependent in 2023, as international locations use monetary levers — resembling tariffs —  to shield their nationwide safety priorities, the report mentioned.

In 2023, provide chains nonetheless stay weak to labor and useful resource shortages, the survey mentioned. However, because the ramifications of the COVID-19 pandemic recede, these disruptions may also ease, in accordance to S&P Global. 

Supply chain disruptions have been top of mind for CFOs since early within the pandemic. Many CFOs and VPs of finance are beginning to transfer away from efficiency-based provide chain fashions to revenue assurance models with extra flexibility and resilience. 

Next yr the S&P survey asserts the labor market will continue to be tight whereas cooling barely the place recessions take maintain, with any slowing in wage progress to be restricted. 

An anticipated rebalancing of the labor market may also possible convey job loss and a lower in job openings as financial tightening by the Federal Reserve additional slows financial progress.

The U.S. is just not the one space susceptible to a recession in 2023. Europe is predicted to have a grim winter with a recession on the horizon, Bloomberg reported.