The financial market looks to experience some restlessness moving into 2023. According to experts' forecasts, we're facing a global economic crisis next year, and the beginnings of panic are already felt in New York. But are there reasons for so much pessimism? To see if Wall Street's bearish outlook is warranted requires a closer look at the numbers.
IMF Lowers Growth Forecasts
In October, the International Monetary Fund published the World Economic Outlook report. This report takes a less-than-optimistic stance, stating the world is on its way to an economic crisis greater than the one experienced in 2022. The report also downgrades growth projections, putting next year's global economic growth at 2.7%. The number is quite different from the one released earlier this year when the projections were at 3.8%.
Much of the impact can be traced back to the war between Russia and Ukraine, which has affected economies in countries across the globe. Oil and goods have substantially increased in price since the war broke out, and this inflation spills over into markets in emerging countries. Without a ceasefire between the two countries, the economic impacts could be considerable. Meanwhile, these emerging countries are likely to suffer further inflation, leading to further global economic instability.
Inflation Control Will Dictate the Economy
Despite these economic instabilities, the US can withstand the downturn while riding out a “mild recession” in 2023, according to leading financial experts. Much of it depends on the government's ability to control inflation. According to specialists, rigid monetary policy and high interest rates should remain throughout the year, but some labor markets should start ticking upward. This, combined with a significant reopening of the Asian markets, led by China, should raise Wall Street's spirits.