For 35 years, British newspaper The Economist has published a guide for what may happen in the year to come.
Deputy editor Tom Standage gives us a taste of The World Ahead in 2023.
Photo: Judah Passow / Network Photographers
Standage tells Jesse Mulligan the "big thing" last year's guide got wrong was Russia's attack on Ukraine.
“We went to press in November 2021 and we didn't think Russia was going to invade Ukraine.
"And it became clear that they were going to do something around the New Year, certainly in January."
The war has had many knock-on effects, he says.
“It pushed up the price of oil, pushed up the price of energy, and pushed up the price of food.
“And that means that inflation is now much higher around the world than it would otherwise have been."
Last year, The Economist's predictions were too optimistic about rising inflation, Standage says.
"In 2022, we thought that it would possibly work its way through the system and be going down by the end of the year. And in fact, we've seen the highest levels of inflation for 40 years in many parts of the world.”
The World Ahead in 2022 did correctly predict plenty of things, though, Standage points out.
“We got the result of the elections in Brazil, and in France, and it very various other places, correct."
The Covid-19 pandemic marked the end of a decades-long period of relative stability and predictability in geopolitics and economics, he says.
The period between the early '90s and Covid's arrival was a kind of holiday from history, Standage says, with low inflation, low interest rates and few major global conflicts.
“The last 30 years have been kind of quiet by historical standards.”
This year, the ongoing war in Ukraine will continue to impact negatively on the global economy, he says.
“That means we're going to have recessions in much of the world during this year, probably about a third of the world is going to go into recession as a consequence of that and so yeah, what happens on the battlefield in Ukraine does have these global consequences.”
One such consequence is a very strong US dollar.
“Because America is suffering from inflation it's been raising its interest rates. And as a result of that, you get a strong dollar, which means that countries that are paying their debts in dollars, or companies that have debts of dollars, or countries that are paying for their imports in dollars are also suffering from a higher dollar that is in part due to higher energy prices, as a result of the war.”
The global fallout from Russia’s invasion of Ukraine is unlikely to abate anytime soon, Standage says.
“We think the fight is going to continue throughout this year because Russia is doing terribly, and we think that they're going to mount a counter-offensive sometime as they think they could be doing better.
“Meanwhile, Ukraine thinks it has a very good chance of taking back more of its territory.
“So neither side really wants to stop fighting at this point. And as a result, we think it's going to go on.”
Around the world, central banks are unlikely to loosen their grip on inflationary pressures, he says.
“They’ve made it very clear that they do want to stamp out inflation, they want to stop it from becoming entrenched. And they want to stop the kind of stagflation that we saw in the ‘70s.
“So they're going to be as hawkish as it takes. Even though it looks like inflation has peaked in many parts of the world, it looks likely that central banks will continue to raise interest rates not as quickly as they were before, but they really want to make sure that this thing is dead. So that is going to lead to a recession, we think, in much of the world.”
Although things look rather grim, adversity can drive innovation, Standage says.
“The head of the International Energy Agency says that the war in Ukraine is a turning point in the history of energy, and is going to be something that accelerates the transition to clean energy.”
Europe never wants to be dependent on Russian gas again, he says.
“So if you look at European countries, many of them have targets for how much of their electricity they want to get from renewable sources by 2030.
“They've raised those targets, maybe they were at 60 to 70 percent by 2030. They're now aiming for 100 percent by 2030.”
