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Global Economic Outlook for 2023

Some easing of supply chain disruptions, but headwinds remain

What can retailers expect from the global economy in 2023? It seems likely that during the year, the rapid rise in inflation and the surge in commodity prices will stabilize or reverse. It also looks like we’ll see less global supply chain disruption than in the previous year. However, the tight labor markets, the Russia-Ukraine conflict, and economic disruption from climate change, among others, look set to continue. 

Below a high-level summary of the Economic Outlook for 2023, prepared by Chief Global Economist Dr. Ira Kalish. Download the Global Powers of Retailing 2023 report to read his full analysis.

Supply chains will stabilize but labor markets remain tight

We are already seeing fewer supply delays and shortages, and this is expected to continue in 2023, except for in China, which will normalize once the COVID-19 situation stabilizes there. Supply chain issues and geopolitical tensions have led many companies to diversify their supply chains. We expect this to continue, and this will likely mean further outflows of capital from China and more investment in other countries in Southeast Asia, India, Central Europe, and especially Mexico. 

The US will probably avoid recession

US growth in 2023 will be slower than in 2022 due to tightening monetary and fiscal policy. A recession may be avoided, if energy prices fall, employment growth remains strong, and there is an easing of supply chain difficulties. Still, a recession remains a possibility.

Europe will experience recession

As real wages have fallen, consumer spending in real terms has fallen. And although energy prices have fallen from their peaks, natural gas prices remain historically high, fueling inflation and reducing the purchasing power of consumers and businesses. It is likely that electricity prices will remain relatively high for a long time.

China will rebound only modestly

With the relaxation of pandemic-related restrictions, a massive surge in infections has suppressed mobility and production, with suppressed economic activity likely to last for a while. Once the disruption recedes, pent-up consumer demand is likely to boost spending. However, China also faces other headwinds that will restrain growth in 2023, including a troubled property market, a withdrawal of capital from China by global businesses, and restrictions on cross-border trade and investment.

Japan will stabilize

Japan’s economy is accelerating from a low base as pandemic-related restrictions disappear and pent-up demand is unleashed. Growth, however, is likely to be modest as Japan’s economy faces headwinds from the weakened global economy, accelerating inflation and higher energy prices. The yen received a boost as the Bank of Japan partially reversed its monetary policy.

India will grow strongly

In 2023, India will become the most heavily populated country in the world, surpassing China for the first time in history. India imports relatively cheap oil from Russia, limiting the impact of the energy shock on its economy, and trade as a share of GDP is lower than in most countries, shielding India from the negative consequences of a global slowdown. The rate of inflation, although relatively high, has fallen recently.

Interested in a more in-depth economic outlook?

This is a high-level summary of the full Economic Outlook as prepared by Dr. Ira Kalish, Chief Global Economist. Download the full Global Powers of Retailing 2023 report to read the full Economic Outlook for 2023. The report also provides an overview of the performance of top 250 retailers, the 50 fastest growers, and provides an analysis of performance across product sectors. It also investigates sustainability in the retail sector, and looks at how retailers are creating the future of the store.

Connect with us

Dr. Ira Kalish, our Global Chief Economist, will be presenting an updated Economic Outlook at the World Retail Congress 2023 in Barcelona from 25 to 27 April. We look forward to meeting you there or connecting with you at your convenience to discuss opportunities for your business.

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