The optimistic outlook is that most countries – particularly in the EU – have become much better at managing global challenges. The not-so-optimistic outlook is that geopolitics is characterised by increased volatility. Subsequently, geopolitics has major negative consequences for the global economy ~ Demetrios Theophylactou
This brief assessment concerning optimism, or luck thereof, as we enter 2023, taking into account the war in Ukraine, as well as ongoing conflicts in the Western Balkans, the Middle East and Eastern Mediterranean, focuses on the impact of the complex global situation on economies. The first part concerns the economy of Cyprus, while the second looks more broadly at global economic trends. The Cypriot economy grew by more than 6% of GDP by the end of 2022, surpassing the EU average. The annual growth rate was substantially higher than the EU average of 2.4% GDP and the eurozone’s 2.1%. Despite the serious challenges posed by the Russian invasion of Ukraine, the Cypriot economy proved resilient when other EU economies faced the risk of recession. Still, this optimistic outlook by no means ignores high inflation and rising energy prices. However, the negative effects of the ongoing war in Ukraine on economic activity appear to be unfolding slowly, inevitably impacting the outlook for 2023.
Real GDP growth in 2023 is forecast at 2.4%, driven by several factors, including the deterioration of EU economic sentiment and weakening of business confidence. When we look at the global picture, higher energy prices and interest rates will cause growth to slow across most of Europe, and other parts of the world, with some countries falling into recession. The energy shock will impact countries differently, with some hit quite hard and some continuing to perform relatively well. In conclusion, the optimistic outlook is that most countries – particularly in the EU – have become much better at managing global challenges, such as the pandemic. The not-so-optimistic outlook is that geopolitics is characterised by increased volatility. Subsequently, geopolitics has major negative consequences on the global economy. Assuming that the war in Ukraine ends in 2023, a most optimistic scenario will prevail in respect to economic performance. Let us hope that this will be the case, for the benefit of the world.
