Will 2022 global economic shocks ruin the party in 2023?


From the get-go, not even a man or woman for that matter with a crystal ball might have quite predicted the ups, and mostly downs of 2022.
After two years of a non-retreating pandemic and related restrictions across the globe in 2020 and 2021, many had expected 2022 to be the year of bliss and perhaps a return to the norm of 2019.
Nevertheless, 2022 has been anything but the pre-pandemic times even as Covid-19 seemingly merged with the background.
After closing 2021 with the highest of expectations, it didn't take long before that optimism was somewhat shattered as a new unprecedented shock seemingly succeeded Covid-19.
Right at the backend of 2021, Russian armed forces began building up near the Ukraine border in action predicted widely to dissipate with some diplomacy between parties.
However, what seemed like mere provocation unbundled into a full-blown crisis with Russia invading Ukraine at the end of February off a chain of reactions that lasted throughout 2022.
The post-invasion period has seen pressure on gas and oil prices with Russia cutting off parts of Europe to its gas supply while Russian oil has itself been embargoed on the global marketplace.
In Ukraine's part, the inability of the country to export wheat and other cereals resulted in a widespread food shortage crisis, especially in Sub-Saharan Africa.
With prices rising in the aftermath, the crisis set off what is now the hottest run of inflation in decades in regions across the world.
Flanked by trillions of dollars in economic stimulus in the previous two years, inflation has almost grown unabated on increased money supply, especially in advanced economies including the US, UK and the Eurozone.
China has meanwhile mostly maintained the Covid-19 era restrictions dampening growth in the second largest world economy.
Inflation in 40-year highs has been experienced in the US and UK on the backdrop of a steep rise in global prices.
With authorities the world over being forced to label inflation as one of the largest problems this year, global central banks have been forced to unwind expansionary monetary and fiscal policies.
Interest rates have for instance lifted off in these economies as the central banks look to mute demand to contain runaway prices.
According to data from the IMF global inflation averaged 8.8 per cent this in 2022 from 4.7 in 2021
Increasing interest rates have nevertheless dampened growth prospects with advanced economies now tipped to go into recession in the next 12 months.
The IMF expects the global economy to grow by 3.2 per cent this year from 6.6 per cent in 2021 and shrink to a growth rate of 2.7 per cent next year.
This according to the IMF is the weakest global growth profile since 2001 except for the 2009 global financial crisis and the acute phase of the COVID-19 pandemic.
Already the US economy contracted in the first half while the year while the Eurozone economy is tipped to shrink in the second.
Subsequently, the US dollar has appreciated as foreign investors pull funds out of emerging and frontier markets in favour of haven investments.
With reduced demand and spending triggered by monetary policy tightening growth companies such as Meta, Twitter and even banks such as Credit Suisse have announced layoffs as recession knocks on the door.
Probable negative investor returns are already expected in both US Equities and bonds whose year-to-date returns remain deep in negative territory.
On its part, the Kenyan economy has largely held on its own with the economy expanding by an average of six per cent in the opening half albeit slower than in 2021.
The August 9 elections were largely peaceful as was the transition to the newly elected administration now well past its 100th day in office.
The new government has begun setting down its agenda which is underpinned by the bottom-up economic model, growing revenue collection and fiscal consolidation.
Nevertheless, global shocks have also hit the economy as inflation remains above the government target range of 2.5 to 7.5 per cent while Kenya shilling shed nearly 10 per cent of its value in 2022.
The World Bank expects Kenya's economic growth to average five per cent over the medium term with inflation easing back into the government's target range by mid-2023.
The recently opened duty-free import window for sugar, maize and rice is expected to ease high food prices alongside the trickling in of freshly harvested produce from farms.
Subsidies on diesel and kerosene are expected to end in January but oil prices are tipped to hold below 100 dollars to the barrel on expected sluggish demand in the global economy.
Externally, central banks in advanced economies are expected to wind up monetary policy tightening which could signal a turning point for foreign portfolio flows back to frontier and emerging markets such as Kenya.
2023 just like 2022 carries with it lots of optimism for not just the local but also the global economy but shocks from the last 12 months may very well persist into the New Year.
Diplomacy and focus on peaceful living and trade support are likely to remain the key areas while resolving the Russia-Ukraine crisis while Central Banks around the world must balance between cooling overheating economies and driving the world into a likely crisis from recession.
The private sector looks forward to working more closely with the public sector in 2023 for better partnerships, trade growth and economic development.

- The writer is a business leader