2023 Outlook

The outlook for 2023 is shaped by several interconnected economic and non-economic developments. The war in Ukraine and conflicts in other regions will bring prolonged human suffering to the affected countries and its people and continue to negatively affect the (global) economy. Social unrest and geopolitical instability are increasing. The increased cost-of-living observed in 2022 is expected to persist in 2023 and, in the short run, continue to elevate poverty and inequality levels. The World Bank estimates that the bottom 40 percent (in terms of income distribution) experiences, on average, 3 percentage points higher inflation than the top 60 percent[1]. In addition, severe weather events will further exacerbate food insecurity, particularly in developing countries that are typically exposed to higher degrees of climate-related risks. While inflationary pressure and energy prices easing off at the end of 2022, risks of new supply disruptions remain in 2023. Subdued demand in advanced economies, monetary policy tightening and high debt burden in developing countries are likely to prevail in 2023, impacting economic activities. 

In January 2023, the International Monetary Fund (IMF) projected that global growth will decrease from 3.4 percent in 2022 to 2.9 percent in 2023. In emerging markets and developing countries growth is expected to increase slightly from 3.9% in 2022 to 4.0% in 2023. Approximately 84 percent of countries are expected to experience lower inflation in 2023. This is mostly explained by declining international commodity prices as a result of lower global demand and cooling effects of monetary policy tightening on underlying (core) inflation, which is expected to decline, according to the IMF. Some emerging markets and developing economies may still be affected as they continue to struggle with heavy debt burdens, weak currencies, subdued income growth, and slowing business investments[2]