The world is apprehensive about a global economic crisis in 2023, with all economic and political indicators confirming that there is no escape from it and its catastrophic repercussions on countries and populations. The world, which has not fully recovered from the shock of the COVID-19 pandemic, is struggling with political crises, the latest of which is the Russian-Ukrainian war, which has generated a global energy crisis, led to the collapse of global supply chains, and increased food prices.
Wael Makarem, Chief Market Strategist at Exness, stated in an interview with MTV that "the fundamental problem is the rise in inflation rates and the inability of central banks to rein it in, combined with the increase in interest rates to levels we have not seen since the global financial crisis and the shrinking of balance sheets," explaining that "this trajectory will negatively affect currency and lead to economic stagnation."
The International Monetary Fund forecasted a slowdown in global growth from 3.2% in 2022 to 2.9% in 2023. Makarem pointed out that "it is no secret that the hypothesis of a global recession is increasing, and as interest rates rise, the economy will contract, and we will experience a global economic crisis."
The first to suffer from this global crisis will be countries with fragile economies burdened with debt and low-income economies, as well as emerging market economies.
Makarem clarified that "countries that have accumulated debt will not be able to withstand rising interest rates, and the cost of debt will increase for governments, leading to a number of them going bankrupt." The global economic crisis will threaten global food security. Exporting countries for basic commodities and grains will resort to protectionist policies and reducing the quantities prepared for export in a bid to protect their food security. This will inevitably raise grain prices for importing countries or nullify any possibility for these countries of obtaining sufficient food stocks.
Regarding the solution, Makarem explained that the probability of a "soft landing" has become marginal due to rising interest rates. The world is awaiting the next steps from the U.S. Federal Reserve, with expectations for the federal interest rate to exceed 4.0% by the end of this year, especially following recent inflation figures. It is worth noting that the Federal Reserve raised interest rates this week by 75 basis points, bringing the prevailing benchmark interest rate to between 3.00% and 3.25%.
He added: "The political crisis plays a fundamental role in this economic crisis, and it is essential to find political solutions that will lead to a decrease in the prices of commodities, grains, and oil and gas barrels. A reduction in these prices alleviates inflationary pressure, at which point central banks can ease policies that negatively impact economies." While awaiting political solutions, the economies of major countries may collapse, and crisis-stricken Lebanon will not be immune to the repercussions.
