Across economies and sectors, 2023 can be a more challenging year as crises occur in the global economy. In fact, in its list of economic trends to watch this year, Euromonitor International speaks of a “new economic reality” that is shaped by geopolitical tensions, high inflation and rising interest rates.
“Sharply reduced purchasing power and a rapidly changing interest rate environment will further dampen business and consumer confidence. Rising geopolitical tensions could result in immediate economic shocks, while also raising the potential of broader shifts in global trade,” Maxim Hofer, senior economies consultant at the said market research firm wrote on its website.
But several opportunities still arise. Independent risk and financial advisory solutions provider Kroll Institute listed the following trends it finds worth watching as the state of the worldwide economy aims to thrive.
Strengthening emerging markets
As Kroll Institute shared on its website, developed markets are expected to go into recession while emerging markets will continue to prosper, supporting the two percent global growth rate in 2023. This year, continuous certain limitations are anticipated, which might disrupt global supply chains similarly in the early stages of the pandemic, as officials work to increase vaccination rates and new cases spread. While restrictions are finally at ease, consumer and business confidence is expected to increase, unless an increase in mortalities comes to light.
Echoes of this observation is likewise seen by Euromonitor as it noted that advanced economies are forecast to grow by 0.7% in real terms in 2023, driven by high recession risks in the US and Europe; while emerging and developing economies are expected to grow by 3.7% in the same year, with some outperformers in Asia-Pacific and the Middle East.
Yet, Kroll Institute also see that emerging market (EM) sovereign debt crises are predicted to occur in 2023. Before the pandemic, some EM economies were overleveraged and were forced to borrow money to pay for their pandemic responses, according to the Kroll Institute. As a result, borrowing costs, the cost of food and energy, and the value of currency have increased globally, causing a decrease in demand for International Monetary Fund and World Bank support in the year.
Emerging infectious diseases
Almost three years into the pandemic, the government and businesses are told to still be armed for the new normal in 2023, as multiple factors, including deforestation, intensive animal agriculture, urbanization, migration and travel can cause the increasing frequency of the widespread of emerging new diseases. With the climate change issue in hand, it becomes a new concern, putting non-tropical areas on alert as they can also be a target of these tropical diseases.
Alongside war and civil disruptions, and anti-vaccine advocacies, businesses and organizations will need to plan strategic approaches and prepare in case public health can affect their business operations. The business sector must take health into account when it comes to the staff, customers, facilities and supply chains of the organizations.
The Kroll Institute highly encouraged the business sector to consider doing health initiatives such as vaccination drives, wellness initiatives and optimization of sanitation of their work environment to lessen the exposure of employees to such infectious diseases. Moreover, focusing on improving the employees’ health and their families and communities, and maintaining situational awareness is important to reduce the health impacts affecting the business sector.
ESG
In business, environmental, social and governance (ESG) is a tool used for attaining ethical and sustainable outcomes. It is commonly used by financial markets when it comes to assessing businesses and forecasting financial success.
According to David Larsen, managing director and institute fellow of Kroll Institute, incorporating ESG in the business sector is not expected to decline in 2023. Environmental concerns will continue to be prioritized, especially those relating to the climate, sustainability and impact on biodiversity. As investors increasingly demand greater transparency on ESG frameworks, it is essential for businesses to invest in ESG frameworks and policies, and ensure that they are effectively implemented across the entire organization to protect the organization’s value and reputation, as well as produce significant, long-term benefits for both the organization and society.
Reinforcing regulatory environment
In troubled or turbulent markets, fraud and other misbehaviors are more common, and these violations should be stopped at any cost, especially when investors and the financial markets are at risk.
“We advise that companies and firms continue to enhance their governance, supervisory, compliance policies, and procedures and training with a risk-based approach to address regulatory exposures,” Kroll Institute reported.
Additionally, the business sector needs to develop a crisis response strategy that includes credible assessment and correction of possibly illegal conduct that can be found, as well as the ability to pivot in reaction to changes in regulatory requirements.
Cybersecurity
Cyber threats will keep developing and pose a persistent threat to every organization in the sector. Alan Brill, Kroll Institute’s senior managing director and institute fellow, believed that cyberattacks will continue to increase this year.
For instance, ransomware assaults are occurring more often and some attackers are also erasing data to restrict data restoration or decryption, making it possible for the attackers to demand ransom payments. As a result, many companies are taking action on investing in safe cybersecurity practices.
Mr. Brill also stated that cybercrimes do not only target business leaders, but celebrities and social media influencers, as well through hate speech, offensive content and physical threats that are increasingly occurring on popular social media platforms as well. For the safety and security of businesses and their people, early detection of such cybercrime from online sources, analysis, integration and data sharing can be crucial.
“Sharing risk intelligence at pace with the speed and velocity of social media will help corporations mitigate risks and navigate social media uncertainty, which is likely to continue into and throughout 2023,” Mr. Brill added.
Stepping into the next stage of the now normal and witnessing the post-pandemic transformations and innovation throughout the years is one step to moving forward. As we look at 2023 and its forecasts, it is important to be fully armed and prepared by planning and putting those plans into action with the goal of economic growth in mind. — Angela Kiara S. Brillantes
