This blog looks at possible scenarios for 2023. Scenarios are not predictions. They simply indicate topics that should be factored into the strategic thinking of Boards in the private sector and those with decision-making authority in government.
The global economy. Current projections assume that slow growth in 2023 (about 2% year on year) for the G20 will be followed by a recovery in 2024. The difficulty of subduing inflation makes it possible that interest rates will be high for longer and recovery will be delayed to 2025. Developed countries can ride out a period of weak growth. But the number of emerging markets facing debt crises, such as Pakistan and Sri Lanka, will substantially increase. Since the G20 global compact on the handling of such crises is unlikely to function smoothly, if at all, we need to allow for a period of considerable international economic dysfunction ahead.
China. China’s policy of national assertion will not fade away after President Xi’s reappointment. On the contrary it may intensify. The South China Sea and Taiwan remain flashpoints. Blockades to test the international response are the possible instrument. For businesses the incentives to rethink supply chains dependent on China and to reassess the risk/return calculation in potential investments should remain strong.
Ukraine. Military stalemate is among the different scenarios for how the fighting might come to an end. With neither side able to achieve their objectives through force of arms, negotiations will become essential in 2023. For Ukraine the risk is that what they are willing to place on the table for negotiation could lead to splits among their supporters and allies. With both sides taking intransigent positions, the disruptions caused by the war will not fade in 2023.
COVID 19. With the exception of China, the rest of the world has been learning to live with COVID 19 and China has now changed its policy to adopt the same path. The focus in 2023 has to be on learning the lessons from the pandemic so that the world responds more effectively when the next highly infectious novel virus emerges. Because health structures tend to differ country by country, much of the rethinking will remain national. But the mechanisms for international cooperation also need review. Alternatives to supplement the WHO may be needed.
Disasters lying in wait. Even on favourable assumptions about the global economy, peace in the Ukraine, a cooperative China, and an absence of novel viruses, other potential flashpoints remain. The most obvious ones are in Iran and the Middle East. This is hardly a new development but the increasing sophistication of armaments makes it a greater danger.
The environment. The aim to reduce the world’s reliance on fossil fuels has taken a knock with concerns about fuel security seemingly more urgent and more salient to short term public policy goals. Neither COP 26 nor COP 27 can be rated a success. Correspondingly, it is argued by some that ESG concerns will also take a knock and fade away. A more likely scenario is that governments will continue to do what they do best and posture and prevaricate. As a result an increased burden of adjustment may fall on the private sector and individual businesses will come under pressure to show how they can do more.
The US. For the rest of the democratic world the worst scenario involves the possibility that former President Trump, legal problems notwithstanding, will summon sufficient support to be nominated again for the Presidential 2024 election by the Republican party. At the same time Biden’s running is not a sure thing. If he decides not to run, we could see uncomfortable splits emerge in the Democratic party. In short, democracy in the US will continue to look fragile in 2023 and unsettling for the world outside.
Africa and Latin America. The fact that neither Africa nor Latin America have been mentioned so far is not necessarily a negative since they are so often seen only as a source of bad news. There are plenty of reasons why Latin America may remain a source of bad news in 2023. Perhaps 2023 will be different for Africa. Perhaps.