5 Takeaways from Talking Global Infrastructure Episode 7: A Look Ahead to 2023
Key talking points from the latest in our podcast series
Our Acting CEO Jon Phillips sat down with Deloitte’s Patricia Buckley and Ian Stewart to map out expectations for the year ahead. Click to listen to the full episode Geopolitical Dynamics & 2023 Outlook where key discussion points include:
1. Inflationary pressure & monetary tightening: harbinger of recession?
The concurrence of rising prices and higher interest rates is often a precursor to economic slowdowns and recessions.
Inflation has largely been driven by an energy crisis in Europe, supply chain disruption and demand outpacing demand post Covid.
On top of those front-of-mind challenges, investors are also having to navigate shifts in the economy brought about by the pandemic, not least flexible working, which looks set to stay across the UK, EU and US.
2. Differing fortunes of varied markings
The UK is expected to enter recession early this year, with Europe set to face negative growth later in 2023.
In the US, economic expansion is forecast to slow rather than stop altogether (the country has benefitted from an easing of supply chains and ambitious infrastructure legislation).
A bright spot for the EU has been the speed with which it has reduced reliance on Russian resources, dropping usage at a faster rate than most thought possible.
That said, squeezed consumer incomes and rising unemployment rates are set to be challenges for the bloc over the coming months.
It’s hoped that China’s easing of zero-Covid policies will prove positive for supply chain stability and demand as we move through 2023.
3. Geopolitics’ starring role in investor strategies
Between the Inflation Reduction Act, the Belt & Road initiative, the Global Gateway and the G7’s infrastructure plan (to name just a few) investors have no shortage of worldwide policy statements to navigate.
Whilst the announcements stemming from these programmes can often promote optimism, speed of implementation is the key determinator of success.
Whilst increased global integration spurred growth towards the end of the 20th century, protectionism has become a greater factor in geopolitics in recent years (as exemplified by the tensions between the EU and US regarding clean energy and tech subsidies).
4. Resilience: 2023’s word of the year?
With the Colins English Dictionary understandably making permacrisis it’s word of the year for 2022, the panel assesses how best to make resilience 2023’s word of the year.
Long-term infrastructure investors increasingly need to look beyond the ups and downs of economic vagaries, closely assessing risk across political, supply chain, financial and ESG spaces over decades to increase the resilience of their investments.
The globe is now on the cusp of a new industrial revolution with regards to decarbonisation and new ways of powering industry, one which will profoundly reshape how we live and do business.
5. Unlocking private capital & the return to expansion
With government balance sheets strained amid a cost-of-living crisis, world leaders need to look to the dry powder held by private investors to facilitate net zero economic growth.
Policymakers must avoid the kinds of knee-jerk reactions to recessions (namely unpredictable policy frameworks and extreme moves on taxation) that hamper long-term investment.