Entering 2022, we assumed that the Covid pandemic would be the most significant economic event of the early 2020s and that we would see a bounce-back and recovery. A month before the Russian invasion of Ukraine, the business leaders assembled at Davos still rated ‘Geo-economic Confrontation’ at a distant 10th on their list of severe global risks.
Coming hard on the heels of the pandemic, the war in Ukraine and rampant inflation have intensified what was already a major shock to economies around the world. Access to markets, energy sources, supplies and labour, taken for granted for decades, have been severely disrupted. Low (if any) GDP growth, ongoing inflation, rising interest rates, shortages of materials and basic foodstuffs, and a potential wage/cost spiral look set to follow.
In April 2022, the IMF slashed its GDP growth forecast and warned of the world economy fragmenting into competing systems. Looking further ahead, three tidal waves we have known about for some time will break this decade:
- The 2020s will see the ageing of populations start to show up in the declining proportions of working-age people in developed economies. Some countries will see a fall in absolute numbers.
- This will be the decade in which government climate change targets start to have an impact, as buildings, transport and industrial processes are reconfigured for Carbon Net Zero.
- The extent to which the actual physical effects of ongoing climate change will have an impact on businesses is still difficult to call, although the projections of the Intergovernmental Panel on Climate Change suggest that it will be significant.
The political climate will remain volatile, both internationally and in the domestic politics of most major economies. The shifting balance of power between the US and China is dramatically reshaping trade and diplomatic relationships. There may be further flashpoints, with trade disputes and military conflicts leading to significant disruption of business and supply chains.
Scanning the environment and anticipating the next set of challenges will be critical. At a time when you will be at an advanced stage of thinking about budgets and plans for 2023, our guest speaker, a prominent economic commentator, will give us a timely perspective on how the economic environment of 2023 and beyond might develop.