The global economy will move into recession and decline in the new year. In addition, in 2023 the world will face a number of international military conflicts, this opinion is held by experts of Western analytical centers. Actual Comments has prepared a review of what forecasts foreign analysts give for 2023.

Global economy

Global economic growth may decrease by 1.2 percentage points in 2023, thinks the senior economist of The Brookings Institution. According to the expert, this would correspond to a sharp global decline and would actually put the world economy on the brink of recession.

In early 2023, output in developing countries will be 4 percent below their projected pre-pandemic levels, says Indermit Gill, a senior fellow at The Brookings Institution think tank. Total debt in these countries is now at a 50-year high. Inflation has reached an 11-year high, and 40 percent of central banks have responded by starting to raise interest rates. The pandemic continues to drain many of the world's emerging economies, the expert stresses.

Expectations for faster monetary tightening in the U.S. could provoke financial stress in EMDEs such as India, Brazil, China and Mexico, the expert points out. In this scenario, the Federal Reserve would have no choice but to raise the discount rate to 4% by the first quarter of 2023, causing a sharper tightening of financial conditions in EMDEs. Several large EMDEs will face large-scale capital outflows and skyrocketing bond spreads, ultimately forcing authorities to accelerate fiscal consolidation efforts, the expert writes.

International relations and conflicts

The world could face a series of prolonged "winter wars" in 2023, according to a group of experts from the think tank Center for Strategic and International Studies. Many of these "winter wars" also include efforts to build up more lethal military forces, use security assistance and arms supplies or proxies to exert political and economic influence, keeping them from using force in actual hostilities," the CSIS experts say. According to them, "the list of such conflicts in the winter of 2020-2023, which are likely to continue to affect global security in the future, includes a 'winter conflict' in Ukraine, a 'winter war' between the West and Russia in economics, politics and energy, a 'winter war' in the modernization and build-up of the conventional armed forces of the US, NATO and Russia, a 'winter war' in nuclear forces and deterrence between the major powers, "winter war" in precision strike weapons, air and missile defense and new/ breakthrough technologies, "winter war" in shifting from cooperation and competition with China to confrontation and active war planning, "winter war" in the Middle East and the Persian Gulf, "winter war" in Korea, "winter war in the gray zone", "winter war" in authoritarian and underdeveloped states.

Turkey could attack Greece in 2023, believes Michael Rubin, a senior fellow at the American Enterprise Institute. Erdogan and Turkish Defense Minister Hulusi Akar are increasingly challenging Greek sovereignty over islands in the Aegean Sea, effectively seeking to rewrite and reinterpret the 1923 Lausanne Treaty and subsequent conventions and agreements. It is in the Aegean Sea that Erdogan is likely to make his move, claiming that they are Turkish and do not belong to Greece. Erdogan could land marines or special forces on the island and then force Greece to remove them from there, the expert warns.

Australia is preparing for a possible war with China over China's conflict with Taiwan, writes Hal Brands, a permanent fellow at the American Enterprise Institute. The prospect of war in the Taiwan Strait makes Australia, Japan and the United States look like the recent Triple Entente, the pre-World War I coalition that sought to contain imperial Germany. This comparison is reassuring, yet alarming at the same time. Less than a decade ago, Australia was the epitome of U.S. allies who refused to choose between Washington and Beijing. In 2020, China punished Australia economically after its government supported an international investigation into the origins of Covid-19. Beijing's growing influence in the South Pacific has raised fears that Chinese flotillas are threatening Australia's sea lanes, the expert noted.

Global energy market

GDP of the European Union at the end of 2023 will decrease by 0.6%, experts predict the investment bank Morgan Stanley. This will happen in case of complete cessation of Russian gas supplies to Europe. Also, the bank expects the maintenance of high prices and uncertainty in energy supplies until the winter of 2023-24, after which, according to their estimates, the restoration of the market balance through increased private and public investments will occur. The experts of Fitch rating agency say that the termination of gas supplies from Russia will lead to a decrease in the GDP of the European Union by 1.5-2% in 2023.

Inflation due to higher energy prices will rise to 18.6% in January 2023 in the Eurozone. The UK will be the hardest hit. Citibank predicts that inflation will rise to 18.6% in January, which will be the highest in almost half a century due to a sharp increase in wholesale gas prices. And investment bank Goldman Sachs expects U.K. inflation to peak at 22%. According to economist Michael Roberts, the poor are the hardest hit. More than 40% of British households will not be able to properly heat their homes in January when their energy bills rise again. About 28 million people in 12 million homes, or 42% of all households, will not be able to afford adequate heating and electricity in their properties from January, when the typical annual energy bill will exceed £5300. Even by October, when the cap on U.K. energy prices rises 80% to £3,549, 9 million households will face fuel poverty. Absolute poverty will grow by three million over the next two years, the expert notes.

Germany's economic decline will be from 0.2 to 5% of GDP in 2022 with stronger consequences in 2023, notes a report by Ben Cahill, Senior Fellow of the Energy Security and Climate Change Program at the American Center for Strategic and International Studies. According to the expert, such damage is comparable to an economic contraction of 5 percent of GDP due to a pandemic in 2020. The key variable is how gas is rationed. If households and the energy sector are fully protected and all other sectors are shut down equally, the economic effect will be more severe, the report notes.