World Economic Trends in 2023

The global economy is slowing down.

Tatsuo Yamazaki, a former official of Japan's Ministry of Finance, believes that in 2022, inflation will sweep the world due to the combination of the Ukraine crisis, the shortage of resources and parts, and manpower shortages. In 2023, there is hope that soaring resource prices and supply chain disruptions will ease, and peak inflation will soon be over. But in America and Europe, where inflation is high, it will not end there, with prices rising well above the 2% target they are aiming for.

Central banks in the US and Europe will certainly continue to tighten monetary policy throughout 2023, and the global economy will most likely move towards a gradual slowdown. In particular, Europe, which has been highly dependent on Russian energy and resources, is likely to experience zero or even negative growth in 2023.

On the Ukraine crisis, the chances of a deep recession in the world economy this winter have temporarily receded as Europe builds up its gas reserves. But if the war drags on until the second half of 2023, the world could face another energy crisis the following winter, especially in Europe. It can be predicted that the situation in Ukraine will lead to the future of the world economy into turmoil pattern will not change in a short time.

Investment funds for private companies could be at risk of capital outflows as the US persists with financial tightening. With the dollar and interest rates high, emerging countries with large dollar debts are likely to fall into a debt crisis. In 2022, the yen-dollar exchange rate fell to a record low of more than 150 yen per dollar. Although the dollar is appreciating, the U.S. policy rate is expected to peak in the first half of 2023 as the trade deficit caused by high resource prices, which accelerated the yen's depreciation, is gradually reduced. The yen is expected to stabilize around 130 yen per dollar in 2023.