Geopolitical risks are real but are likely to be contained
If there is one thing we have learnt from the past year, it is that the world will always find ways to spring surprises. Rather than make specific predictions, it is more productive to get a grip on the forces working under the surface of the global economy and to work out how they could produce upside possibilities or downside risks. The really big forces that matter in 2023 include geopolitics, China’s changed approach to Covid-19, and central banks’ monetary tightening which have caused anxiety. But we should also not forget potential positives such as new technologies that could create huge opportunities for growth.
As we work out how these forces might play out, what strikes us is that the risks are wellknown but there are also potential upsides that are not being given enough consideration. Certainly, the coming year will see a global slowdown and there could even be recessions in the more vulnerable areas. Our best guess is that the three major sources of risk — geopolitics, China and monetary tightening — will produce a rough beginning to the year. But, as the year progresses, we will find that the downsides can be managed and that there will be profitable opportunities that can be exploited.
