What happens next? It all depends on how the geopolitical, energy and economic shocks of 2022 evolve, and how they affect each other WorldAhead
By Zanny Minton Beddoes: Editor-in-chief, The Economistof the Collins English Dictionary have declared “permacrisis” to be their word of the year for 2022. Defined as an “an extended period of instability and insecurity”, it is an ugly portmanteau that accurately encapsulates today’s world as 2023 dawns.
What happens next? It all depends on how these three shocks—geopolitical, energy and economic— evolve, and how they affect each other. In the short term the answer is grim. Much of the world will be in recession in 2023, and in several places economic weakness could exacerbate geopolitical risks. This poisonous combination will be most evident in Europe. Notwithstanding the mild autumn and resultant dip in energy prices, the continent faces difficult winters in 2022-23 and 2023-24.
The biggest geopolitical risk is that Mr Putin, unable to succeed on the battlefield, tries harder to exploit these European vulnerabilities. This strategy is already evident in Ukraine itself, where Russia is doubling down on trying to destroy the country’s energy infrastructure as winter approaches. So far Mr Putin’s attempts to break the solidarity of backing for Ukraine in western Europe by weaponising gas have failed.
America’s economy enters 2023 in fundamentally stronger shape than either China’s or any in Europe. The Federal Reserve’s aggressive rate increases will tip the economy into recession, but with the labour market still strong and household savings copious, it will be a mild one. Although high petrol prices have reinforced the inflation surge and hurt the Biden administration, the country is a big energy producer and has therefore benefitted from this year’s commodity shocks.
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