As we commence a new calendar year, the top financial institutions and governing bodies publish their economic outlooks for 2023. I’m here to provide a synopsis so you don’t have to delve through pages of charts, data, and economists’ opinions.  

As an opening statement, there is plenty of disagreement about the prospects of the world economy. Despite the uncertainty of higher inflation and cost-of-living pressures, tight labour markets and volatile energy prices, I remain optimistic about the outlook for the Australian economy. 

In the table below, I have summarised expected global recession and growth projections from Commonwealth Bank of Australia (CBA), International Monetary Fund (IMF) and The Organisation for Economic Co-Operation and Development (OECD). 

The table highlights the differing opinions on global recession outlooks and growth projections across varying countries. Although the data above suggest these institutions disagree, they mostly align with the following underlying trends for the year.  

• Central banks will continue to raise interest rates to soften inflation. This is expected to continue through the first half of 2023 with rates increasing anywhere from 0.25% to 1%.  
• As the higher rates trickle through the economy, inflation is expected to alleviate expenditure as household budgets squeeze. 
• Weakness in consumer spending will inevitability reduce economic activity and employment rates.  
• Some economies may fall into recession or low-level growth. At some point, central banks will commence lowering interest rates to stimulate more economic growth.  

Overall, curbing inflation is the number one priority for central banks in 2023.  Don’t hold your breath on any of the above predictions being correct, majority will get it wrong given the various factors at play. I look forward to reviewing the projections at the end of 2023 and comparing what played out.  

Now, as always, it is imperative to be patient and stick to your investment strategy so you can capitalise when market trends fully reverse themselves. Market volatility can create the best buying opportunities when you have a long-term investment horizon. A key point to remember is financial markets are forward-looking and have already priced in its predictions.