In the past two years, the global economy was fully focused on growth as the lockdowns had unknown impacts. This was done by making sure there is enough money in the world to keep the reversal going as and when it happened. But with this strategy came a familiar but unwanted consequence that is decades high inflation that has only recently shown some signs of reduction.
As we enter 2023, the global economy is at a very critical juncture where it has to choose between lower or even negative growth or higher inflation. The choice would be clear within the first two months of the year. As there will be a rapid slowdown in spending as the festival season comes to an end. On the other end, the central banks would continue to push the interest rate higher than estimated.
The start of the year itself has imbalances that the global economy has not witnessed in decades. The interest rates are at their highest in past two years along with the energy products inventories being the lowest. In addition to this, even the food grain products inventories are at the lower end.
Thus, having lower essentials and higher costs might not only lead to lower growth but may be even a recession globally. And this might be the most anticipated recession on record.
This is why growth will look like that child who has been left alone after having all the attention for two years continuously. Where and when the trajectory changes its course is still unknown but it will be important to see how the global leaders and central banks do once the fall starts.
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