During most of 2022 and early 2023, the world economy has been going down. Inflation is growing at the highest rate since 1982 and conditions seem to be getting worse by the day. Interest rates are constantly being raised in order to combat inflation and the stock market is looking like it is going to crash.
So the question on everybody’s mind is will the economy get better?
Let’s find out!
A Mild Recession Could Occur
According to an article written by Madeleine Ngo on vox.com called 3 different paths, the economy could take in 2023 a mild recession could take place very soon. This means that the economic growth market and the workers’ market would be significantly weakened. However, the recession would be relatively short and the markets will recover without much pain being inflicted.
The US chief economist Beth Ann Bovino stated that she “expected two-quarters of negative GDP in the first half of 2023.” She also said that the number of unemployed people would rise by 5.6% by the end of the year. When the article was written the unemployment rate was 3.7%. Bovino recommended that extra savings that some people saved up during the pandemic could provide a safety net for them.
Inflation is not expected to ease up anytime soon, because of the rising interest rates hikes by the federal reserve. In November of 2022, the prices for essential goods such as groceries and gas were up by 7.1% from the previous year.
The officials working for the federal reserve are anticipating inflation to slow down in 2023, but this has not gone to plan, because inflation is still rampant.
Resilient Consumers and Businesses
JPMorgan has an entirely different outlook on things according to their article Growth will likely weaken, but we see a path to a better economic outcome and stronger-than-expected equity returns by Jacob Manoukian.
Manokian writes that so far the economy has only experienced worsening conditions in the real estate sector which is highly sensitive to rising interest rates. The US economy overall looks to be in a decent condition considering the circumstances. Apparently, consumers could start spending more money than previously during 2023, because of the inflation starting to slow down and income recovery starting up.
More than 90% of house loans are apparently fixed and cannot be renegotiated by lenders. This means that the cost of borrowing money hasn’t gone up even with rampant inflation. It also looks like jobs are starting to become easier to find and jobless workers are feeling more optimistic about finding a new job.
Businesses have also reported that their profit margins have not suffered as much and actually been quite resilient despite the bad economic circumstances. Even with the elevated wages given to workers. Overall businesses have been able to adjust quite well and retain their profit margins.
A Severe Recession could Occur
On the other hand, a recession could be on the horizon according to the same article from vox.com. Even if several economists have said that this is highly unlikely it is still not off the table.
Let’s say that the world’s supply of oil was to be further damaged by the war in Ukraine or if China continues with the same covid policies the world economy could slow down fast. A more severe recession of this kind will most likely be caused by the energy sector.
A more drastic downturn could happen according to Klemen Bostjancic if inflation turns out to be more stubborn than the policymakers currently anticipate.
Summary
The global economy has been experiencing a downturn since most of 2022 and early 2023, with inflation reaching its highest rate since 1982 and interest rates being constantly raised. According to an article on vox.com, the economy could take three different paths in 2023: a mild recession, a resilient consumer and business market, or a severe recession.
A mild recession could occur, which could cause economic growth and worker markets to weaken, but the recession would be short-lived, and the markets would recover without much pain being inflicted. Inflation is not expected to ease up anytime soon, and officials anticipate it to slow down in 2023.
A resilient consumer and business market could also occur, with consumers expected to start spending more money than previously, and businesses reporting resilient profit margins. A severe recession could occur if the world’s supply of oil is further damaged or if inflation turns out to be more stubborn than policymakers anticipate.
