Global economy of 2023 is going to be a wild ride | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Friday
July 11, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
FRIDAY, JULY 11, 2025
Global economy of 2023 is going to be a wild ride

Bloomberg Special

Stephanie Flanders, Bloomberg
12 January, 2023, 09:35 pm
Last modified: 12 January, 2023, 09:40 pm

Related News

  • Bangladesh pivots to Asia, seeks stronger trade ties amid global shifts
  • Dollar drifts ahead of Trump's return to the White House
  • UK economy in October suffers first back-to-back declines since 2020
  • Indian rupee's demand dips in Bangladesh
  • IMF chief says world economy at risk of low-growth malaise, rising dissatisfaction

Global economy of 2023 is going to be a wild ride

The pillars of prosperity that supported 30 years of growth have crumbled. Now the world has to cope with inflation, labor shortages and geopolitical unrest.

Stephanie Flanders, Bloomberg
12 January, 2023, 09:35 pm
Last modified: 12 January, 2023, 09:40 pm
Photo illustration: 731; Photos: Alamy; Bloomberg; Getty Images/Bloomberg
Photo illustration: 731; Photos: Alamy; Bloomberg; Getty Images/Bloomberg

Not for nothing has this been dubbed the "dangerous decade." Already, a global pandemic, Russia's invasion of Ukraine and the return of inflation have shaken the 21st century global economy to its core.

After the shocks of 2022, a recession for large parts of the world in 2023 seems a safe bet. Tougher to gauge, and more frightening, is the long-term impact of money itself being repriced and the assumptions that underlie more than 30 years of global economic history being overturned.

Plentiful cheap labor, low energy and transportation costs and a generally peaceful era for geopolitics all helped turbocharge the globalization of supply chains and drive economic growth around the world in the decades after 1990. Whenever one of those pillars wobbled, there was cheap money to keep the party going, especially in the years after the 2008 financial crisis. The three major central banks—in the US, the euro zone and Japan—have kept their key interest rates below 5% since 2001. For most of the past 10 years, rates have been close to zero and certainly well below the rate of inflation.

In less than three years, each of those supporting pillars of globalization has been knocked away. Workers are scarce and increasingly expensive in the US, Europe and the UK. Oil prices have more than tripled since 2020, and the global cost of energy jumped 50% in 2022 alone.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

War has come to Europe with Russia's invasion of Ukraine, and President Vladimir Putin and President Xi Jinping are openly challenging the post-Cold War order and Western liberal values. In response, the major powers have declared war on Russia's economy—and the US has begun openly pursuing policies designed to slow China's rise.

In October 2021 some listeners found it jarring when US Secretary of Commerce Gina Raimondo talked in an interview about denying China advanced tech. Now US export controls on advanced semiconductor technology aimed at China are a reality, with the Netherlands and Japan being urged to follow suit and the number of blacklisted Chinese entities growing all the time. Global businesses are left wondering whether—and how—intricate supply chains that took decades to build must be remade.

The most disturbing consequence of all these shocks was the return of inflation. Central banks that ignored the first embers shifted forcefully into firefighting last year, unleashing the fastest, most synchronized tightening of monetary policy in two generations.

More than 90 central banks raised interest rates in the spring and summer of 2022, at least half of them by three quarters of a percentage point in a single bound. This had an equally dramatic effect on long-term borrowing costs for businesses, consumers and governments.

At the start of 2022, the yield on the 10-year benchmark US government bond was around 1.5%, and the market was expecting the federal fund rates to stay below 1%. Instead it ended the year above 4%, with 10-year yields expected to be not far short of that level throughout 2023.

It's not only the size of the shift that's historic but also the pace. In the UK, the rate on a five-year fixed-rate mortgage tripled, from 2% to 6%, in barely two months—this, after more than two decades during which households, businesses and investors got used to the idea that interest rates could always go lower.

One pressing question for 2023 is how the jump in the cost of borrowing will affect business investment, consumer spending and government budgets. The second key issue is how corporations will react to a world in which the tide of history now seems to be running against them.

We know that home prices are taking a hit as property gets repriced in many countries to reflect higher mortgage costs. According to Bloomberg Economics, UK house prices are now 20% higher than fundamentals would suggest. The figure for the US is 10%. The adjustment is already under way in many countries. Hong Kong may lose its title as the most expensive property market in the world.

Is it possible for economies to continue to grow while interest rates and joblessness are going up and both real incomes and house prices are going down? We are about to find out. We have seen "soft landings" in the US occasionally. But those involved slowing the economy to a more sustainable growth rate, not slamming on the brakes hard enough to drive the unemployment rate up.

The financial crises in Mexico and Asian emerging-market economies after the US started increasing interest rates in the mid-1990s showed that even a soft landing in the US can bring other parts of the world down with a bump, especially when it's accompanied by a soaring dollar. Europe and the UK are already in recession. Globally, Bloomberg Economics is forecasting growth of 2.4% for 2023. Excluding the crisis years of 2009 and 2020, that's the slowest rate since 1993.

To sum up: There's no more free money; macroeconomic policymakers are being tested; and the basic geopolitical assumptions underpinning more than 30 years of global economic integration are being thrown into the air.

If the long-term relationship between economic activity and inflation in developed economies has also shifted permanently, these trends may well get worse. Interest rates would go higher, for longer, as central banks work out what's going on and households start to expect inflation to stick around. Economies would face deeper recessions that are harder to escape from. Politicians struggling with limited options would be more likely to fall back on short-term isolationist solutions.

A gloomy outlook indeed. But just as the world was transformed by unexpected events in 2022, the next 12 months could see it remade again.

With its strong labor market and still healthy consumer balance sheets, the US could narrowly avoid recession or only see a brief contraction in output. Europe's relatively mild winter could continue, leaving it plenty of gas to get to summer. Households facing the worst squeeze in living standards since the 1970s might just catch a break.

Emerging-market economies, as a group, could defy history and avoid big capital outflows and a string of crises. Bloomberg Economics' chief emerging-market economist Ziad Daoud reckons the risk of widespread defaults due to higher global borrowing costs is much lower now than it was in the 1980s, and the most vulnerable countries account for a much smaller share of the global economy.

The most important piece of this brighter alternative future is now the most uncertain: China. Ditching Covid Zero policies abruptly in the final weeks of 2022 shocked observers inside and outside the country and sent infection rates soaring. Nobody knows how this will play out.

The messy pivot could have unpredictable policy consequences, given how much Xi had invested personally in protecting the population from the virus. But it could well bolster economic growth in the second half of the year, once infection rates level off. That, in turn, could drive energy prices up, making it harder to tame inflation in the US and Europe. Bloomberg Economics believes that faster reopening could push China's 2023 GDP growth to 5.1% and add about 1 percentage point to global inflation relative to a repeat of the 3% expansion China managed in 2022. An upside scenario of 6.3% growth could push up global inflation by as much as 1.7 percentage points.

Could global growth also surprise on the upside? Dreams of a widespread productivity dividend from Covid-19—thanks to remote work and faster adoption of automation—seem a bit fanciful now. But short-term supply chain pressures are a fraction of what they were a year ago. For all the talk of deglobalization, the drivers that looked set to transform the world economy a few years ago—the digitalization of global services, for example, the transition to a net-zero economy and the rise of automation—have not gone away.

Beneath the surface, these trends mostly still point toward more integrated markets—even if politicians in the US and China are resolutely marching the other way. The microeconomic story of 2023 will be how businesses attempt to square that circle, nearshoring and diversifying suppliers to insure against supply chain disruptions, and lobbying and resisting, where they can, government efforts to create splits between trading partners.

Despite the aggressive posturing, many businesses and investors seem to be betting that globalization—in some form—is here to stay and that the short-term costs of a true unraveling will be too high for politicians to withstand. That hope may also prove fanciful, given the cold wind blowing through geopolitics. But if central banks can bring inflation under control in 12 months' time, almost anything is possible—and just about everything will be easier.

Top News / World+Biz / Global Economy

Global economy

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Bangladesh's delegation, led by Commerce Adviser Sk Bashir Uddin, began high-level negotiations with USTR Ambassador Jamieson Greer at 9pm Bangladesh time on Thursday (10 July). Photo: Collected from the Facebook handle of Golam Mortoza, Press Minister at the Bangladesh Embassy in the US
    No need to worry as US tariff talks ongoing: Fouzul tells biz leaders
  • Economist Abul Barkat; Photo: Courtesy
    Economist Abul Barkat arrested in graft case
  • Representational image. Photo: Syed Zakir Hossain/TBS
    Explainer: Why SSC pass rate hit a 17-year low

MOST VIEWED

  • Graphics: TBS
    BB raises startup fund limit, drops upper age barrier
  • Workers pack undergarments at the packing section of a garment factory in Ashulia, on the outskirts of Dhaka, Bangladesh, April 19, 2025. Photo: REUTERS/Fatima Tuj Johora
    After US tariffs, jobs hang by a thread in Bangladesh's garments sector
  • Photo: Mohammad Minhaj Uddin/TBS
    SSC, equivalent results: Pass rate drops to 68.45%, GPA-5 also declines
  • File photo of containers at Chattogram port/TBS
    US buyers push Bangladeshi exporters to share extra tariff costs
  • Govt vehicle purchase, foreign trip, new building construction banned: Finance ministry
    Govt vehicle purchase, foreign trip, new building construction banned: Finance ministry
  • Students sit for SSC exam at Motijheel Girls' High School on 10 April 2025. Photo: Mehedi Hasan/TBS
    SSC exam results out: Here's how you can check online and via SMS

Related News

  • Bangladesh pivots to Asia, seeks stronger trade ties amid global shifts
  • Dollar drifts ahead of Trump's return to the White House
  • UK economy in October suffers first back-to-back declines since 2020
  • Indian rupee's demand dips in Bangladesh
  • IMF chief says world economy at risk of low-growth malaise, rising dissatisfaction

Features

Photo: Collected/BBC

What Hitler’s tariff policy misfire can teach the modern world

9h | The Big Picture
Illustration: TBS

Behind closed doors: Why women in Bangladesh stay in abusive marriages

12h | Panorama
Purbachl’s 144-acre Sal forest is an essential part of the area’s biodiversity. Within it, 128 species of plants and 74 species of animals — many of them endangered — have been identified. Photo: Syed Zakir Hossain/TBS

A forest saved: Inside the restoration of Purbachal's last Sal grove

12h | Panorama
Photo: Rajib Dhar/TBS

11 July 2024: Riot vehicles, water cannons hit the streets as police crack down on protesters

5h | Panorama

More Videos from TBS

'Hypocrisy' will not continue, Iran tells IAEA

'Hypocrisy' will not continue, Iran tells IAEA

7h | TBS World
OpenAI to release web browser in challenge to Google Chrome

OpenAI to release web browser in challenge to Google Chrome

7h | TBS World
Will the title 'Honorable and Excellency' be abolished?

Will the title 'Honorable and Excellency' be abolished?

8h | TBS Today
July Declaration must be constitutionally recognized: Akhtar Hossain

July Declaration must be constitutionally recognized: Akhtar Hossain

8h | TBS Today
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net