What You Need To Know About The World Economy In 2023

So what should we expect from 2023 - and beyond? The end of the year always sets economists and market analysts off on projections for the 12 months ahead... and they are usually wrong.

- Hamish Mcrae

Last year saw a particularly hopeless set of forecasts, with the official forecasts of inflation far too optimistic, and hardly anyone predicting the collapse of the prices of US high-tech shares. Even the better forecasts have not been much help to investors. Take the one from Morgan Stanley, which did predict a surge in inflation and interest rates, thought that the benchmark S&P500 index would be rangebound and volatile. Well, it has been volatile, but not rangebound, for it is currently down nearly 20 per cent on the year.

So rather than trying to predict what might happen in the coming year, let's step back and think of the wider features of the world economy right now. Here are five propositions.

First, there is a global economic cycle and this year sees the downswing of that cycle. We all know this, and while there is a debate as to which countries will come through it in better shape than the others, the big picture is one of recession. Current conventional predictions are that the US will pull out all right, the UK will have a long and difficult recession, and that continental Europe will be somewhere in between.