The Banking Executive Magazine - January 2023 Issue

Global Markets Outlook 2023 driving global food and fuel prices to high levels. In 2023, an energy crisis is gripping Europe. Interna- tional Energy Agency chief Fatih Birol and European Commission President Ursula von der Leyen have warned that Europe could face a natural gas shortage of 27 billion cubic meters in 2023. That is equivalent to nearly 7% of the region’s annual consumption. • Crypto currency: Year 2022 was a very bad year for crypto. Bitcoin’s value fell by more than 64% in 2022 as the United States Federal Reserve raised interest rates and investors settled into their risk-off, bear market strategies. The crypto world was also rattled in 2022 by the shocking death spiral of digital currency exchange FTX. Elon Musk has lost a bigger fortune than anyone in history. Demand for Teslas weak- ened as competition in electric vehi- cles from established automakers surged last year. GLOBAL MARKETS OUTLOOK AND OPPORTUNITIES IN 2023 With many of the challenges of 2022 continuing into 2023, the outlook and opportunities of global markets and economies are: MORE RESILIENCE IN 2023 During 2022, global markets were impacted by a series of significant challenges: the COVID pandemic, disruption to global supply chains, the outbreak of war between Russia and Ukraine, and higher energy and food costs leading to rising inflation. Many of these issues are set to persist into 2023, along with new concerns. Yet despite potential challenges ahead, there are signs that investors, businesses, consumers and supply chains are beginning to adapt to more difficult conditions, hence global markets are becoming more resilient. WEAK ECONOMIC OUTLOOK 2023 After several years of turbulence, and grappling with a range of converging crises, economies around the world are slowing. And they are slowing more than many initially anticipated. The International Monetary Fund IMF has lowered its forecast for Global Gross Domestic Produce GDP. The slowing of GDP growth comes at the same time as inflation reaches a forty-year high in many countries, driven by sharply rising energy and food costs. GLOBAL MARKET UNCERTAINTIES FROM RUSSIA-UKRAINE WAR Russia-Ukraine war has not only contributed to global inflation, but it has also exacerbated disruptions in global supply chains and global mar- kets. This is creating huge uncertain- ties in global markets. LOW CONFIDENCE IN GLOBAL MARKETS The high cost of energy, commodity shortages and supply chain disrup- tions have contributed to rising prices, leaving investors with less in- come. As a result, confidence in global markets is falling sharply to levels below those seen at the begin- ning of the pandemic. MORE RESILIENT GLOBAL SUPPLY CHAINS The global supply chain disruptions that began during the pandemic will be continuing in 2023. Shortages of raw materials, ongoing lockdowns in some locations, and bottlenecks in production and logistics will be all impacting product availability during 2023. However, despite the chal- lenges and the weaknesses and vul- nerabilities, global supply chains will adapt to overcome and minimize disruption to operations. In the long run, we expect such adaptation to global supply chains to be broadly positive. Although there may be some loss of efficiency, over the long term, global supply chains will be more resilient to future shocks, more the BANKING EXECUTIVE 38 ISSUE 169 JANUARY 2023 Impact of Russia Ukraine war (Source: GfK’s Global Strategic Insights)