Dive Brief:

• The COVID-19 pandemic, the Russia-Ukraine war and other geopolitical shocks will continue to impact the global economy into 2023, according to an S&P Global Market Intelligence Report released Tuesday. 
• The report, A World Rebalancing, outlines five overarching themes that will shape economic policy in 2023: unresolved conflicts, energy security, easing supply chain disruptions that will remain vulnerable to labor and resource shortages, transitioning labor markets as demand overruns supply and likely recessions in both Europe and North America. 
• "The tests ahead are interconnected and have vast commercial impact," said Lindsay Newman, head of geopolitical thought leadership at S&P Global Market Intelligence in a statement. In this new era of uncertainty and instability, “businesses and markets will have to navigate sanctions, increase protectionism, government interventions, alternative payment systems and reputational risk,” she said. 

Dive Insight:

Earlier this year, many CFOs had a dim outlook on economic conditions in both North America and Europe in the wake of looming geopolitical conditions and rising inflation. Now, that dim outlook is carrying over into 2023, according to S&P Global, as geopolitical tensions continue to create rifts in macroeconomic conditions. 

”A key takeaway from 2022 is the extent to which the risk environment has shaped the economic outlook. We will enter 2023 with a number of conflicts and competitions unresolved and sources of risk,” said Newman.

The ongoing Russia-Ukraine war as well as other unresolved risks will persist into 2023, filtering into the global economic outlook, according to the survey. 

“Despite the disparate pandemic experience, going into 2022 there was hope that we would see a linear economic recovery. Russia’s invasion of Ukraine to start the year quickly and profoundly changed the trajectory of the year ahead,” said Newman in an emailed response to questions. “Looking ahead to 2023, finance leaders can prepare for more volatility rather than less,” she said. 

Economic and security spheres will become increasingly interdependent in 2023, as countries use financial levers — such as tariffs —  to protect their national security priorities, the report said.

In 2023, supply chains still remain vulnerable to labor and resource shortages, the survey said. However, as the ramifications of the COVID-19 pandemic recede, these disruptions will also ease, according to S&P Global. 

Supply chain disruptions have been top of mind for CFOs since early in the pandemic. Many CFOs and VPs of finance are starting to move away from efficiency-based supply chain models to revenue assurance models with more flexibility and resilience. 

Next year the S&P survey asserts the labor market will continue to be tight while cooling slightly where recessions take hold, with any slowing in wage growth to be limited. 

An expected rebalancing of the labor market will also likely bring job loss and a decrease in job openings as monetary tightening by the Federal Reserve further slows economic growth.

The U.S. is not the only area at risk of a recession in 2023. Europe is predicted to have a grim winter with a recession on the horizon, Bloomberg reported.