Over the past year, geopolitics has made a dramatic comeback as a driver of the global economy and financial markets.
The confrontation between the West and Russia over Ukraine has triggered an energy crisis, as well as soaring food prices.
Far from normalising, international commerce has reorganised according to political alliances, marking the dawn of a multipolar world.
This has resulted in a new economic reality, with more elevated inflation and a monetary policy regime prioritising inflation stability over economic growth.
As a result, interest rates are at their highest in years and the global economy is slowing.
Looking ahead, coronavirus-related disruptions in production centres like China, shifting demographics, climate change, weakening business investment in the aftermath of geopolitical ruptures all suggest a much slower average pace of global economic growth than in the 2010-2019 period.
Inflation will remain an issue in 2023, although it is likely to peak and start to decline.
US and China growing below potential, eurozone in recession
The US will manage to narrowly avoid recession in 2023, according to our forecasts.
Tighter financial conditions are leading to a pullback in cyclical spending, namely goods consumption and housing, but healthy balance sheets and a resilient labour market should act as a buffer against an outright downturn, in part thanks to a continued recovery in spending on services.
In the eurozone, the energy crisis is dominant. A recession most likely started in the fourth quarter of 2022 and will persist until late in the first quarter of next year, with a peak-to-trough fall in gross domestic product of about 1 per cent.
Russia's Gazprom gas pipelines to Europe — in pictures
Fiscal policy support, resilient labour markets and high savings should mitigate the worst of the downturn, but the risks are on the downside amid persistent uncertainty over gas supply.
For China, below-consensus growth of 4.5 per cent in 2023 will represent a bounce from 3.3 per cent this year.
However, lower growth potential, fiscal consolidation and a slow shift away from the government’s zero-Covid policy should prevent the economy from growing more strongly.
A likely continued decline in land sales beyond 2022 will probably prolong the risk of policy hesitation at local government level even after the end of coronavirus disruptions.
The decisive factor will be how quickly China can move away from these disruptions, with first signs indicating that it will do so gradually.
Timing-wise, China’s reopening on the mainland can be expected to lag that of Hong Kong by about six months. Hence, we expect any meaningful reopening to happen only towards the end of the first quarter in 2023.
GCC: beneficiaries of geopolitical fractures
In 2022, GCC economies broadly benefited from higher oil prices and a boost to their domestic economies following the pandemic and the transformed geopolitical environment.
Their GDP growth is likely to moderate to 3.4 per cent in 2023 after reaching 6.1 per cent in 2022, as the global economy slows down.
Nevertheless, the region looks set to grow more rapidly than the global average, supported by still elevated oil prices.
As a result, 2023 should see the fiscal surplus ease modestly to 7.1 per cent of GDP and the current account surplus to 15 per cent.
A better measure of economic activity is non-oil GDP growth, which should ease from 4.8 per cent to 4.3 per cent over the same period.
This stresses the importance of transformation plans across the GCC, which are revitalising the private sector.
The combination of targeted government subsidies and a firm peg of local currencies to the US dollar is expected to keep inflation below 3 per cent in 2023.
A relatively more constructive economic backdrop, coupled with a robust pipeline of initial public offerings and initiatives to raise foreign ownership limits further, should allow for a much more defensive performance for GCC equities in the year ahead.
This is in contrast to previous cycles when a weak global backdrop saw the GCC underperform developed and emerging markets.
Financial markets 2023: yields make a comeback
As for financial markets, as inflation peaks and monetary policy reaches restrictive territory, fixed income should become more attractive again.
This means that the performance of bonds and equities should again diverge, as equity markets could still be volatile in the first half of 2023 and slower economic growth hits company earnings.
We expect core bonds to once again play a more relevant role within portfolios going forward.
Yields have now reached levels that offer some protection against adverse market effects that will likely occur as we work through a period of substantial economic uncertainty.
Furthermore, the diversification benefits of adding bonds to a portfolio, which were absent in 2022 as both equities and bonds declined, should become tangible again, especially once growth risks start to dominate the headlines.
Continued headwinds for equities
The environment remains challenging for equity markets, as nominal economic growth is expected to slow substantially, thereby reducing revenue growth potential.
Furthermore, close to record-high corporate profit margins will likely come under pressure and start to reflect various cost pressures, including the energy price shock, higher wages and more expensive financing costs.
Such an environment speaks in favour of more defensive equity strategies.
Such an environment speaks in favour of more defensive equity strategies
Dr Nannette Hechler-Fayd’herbe,
chief investment officer for EMEA and global head of economics and research at Credit Suisse
Companies that can defend profit margins by passing on higher costs and that operate in fields with high barriers to entry — characteristics that can be found in defensive quality segments — are likely to outperform.
Once the interest rate environment starts to stabilise and uncertainty diminishes, however, it will likely be time to shift into quality growth companies, which are currently facing substantial headwinds from increasing rates.
In 2023, the key for investors will be to continue to look for economic and financial market inflection points, actively manage risks and adjust asset allocations to create broadly diversified and robust investment portfolios.
Dr Nannette Hechler-Fayd’herbe is the chief investment officer for EMEA and global head of economics and research at Credit Suisse
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THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
Killing of Qassem Suleimani
The%20specs
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Company profile
Name: Infinite8
Based: Dubai
Launch year: 2017
Number of employees: 90
Sector: Online gaming industry
Funding: $1.2m from a UAE angel investor
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Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
UAE currency: the story behind the money in your pockets
Upcoming games
SUNDAY
Brighton and Hove Albion v Southampton (5.30pm)
Leicester City v Everton (8pm)
MONDAY
Burnley v Newcastle United (midnight)
The biog
Name: Fareed Lafta
Age: 40
From: Baghdad, Iraq
Mission: Promote world peace
Favourite poet: Al Mutanabbi
Role models: His parents
Global state-owned investor ranking by size
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Essentials
The flights
Emirates and Etihad fly direct from the UAE to Los Angeles, from Dh4,975 return, including taxes. The flight time is 16 hours. Alaska Airlines, United Airlines, Delta Air Lines, Aeromexico and Southwest all fly direct from Los Angeles to San Jose del Cabo from Dh1,243 return, including taxes. The flight time is two-and-a-half hours.
The trip
Lindblad Expeditions National Geographic’s eight-day Whales Wilderness itinerary costs from US$6,190 (Dh22,736) per person, twin share, including meals, accommodation and excursions, with departures in March and April 2018.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
Tour de France Stage 16:
165km run from Le Puy-en-Velay to Romans-sur-Isère
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COMPANY%20PROFILE
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match details
Wales v Hungary
Cardiff City Stadium, kick-off 11.45pm
Defined benefit and defined contribution schemes explained
Defined Benefit Plan (DB)
A defined benefit plan is where the benefit is defined by a formula, typically length of service to and salary at date of leaving.
Defined Contribution Plan (DC)
A defined contribution plan is where the benefit depends on the amount of money put into the plan for an employee, and how much investment return is earned on those contributions.
The full list of 2020 Brit Award nominees (winners in bold):
British group
Coldplay
Foals
Bring me the Horizon
D-Block Europe
Bastille
British Female
Mabel
Freya Ridings
FKA Twigs
Charli xcx
Mahalia
British male
Harry Styles
Lewis Capaldi
Dave
Michael Kiwanuka
Stormzy
Best new artist
Aitch
Lewis Capaldi
Dave
Mabel
Sam Fender
Best song
Ed Sheeran and Justin Bieber - I Don’t Care
Mabel - Don’t Call Me Up
Calvin Harrison and Rag’n’Bone Man - Giant
Dave - Location
Mark Ronson feat. Miley Cyrus - Nothing Breaks Like A Heart
AJ Tracey - Ladbroke Grove
Lewis Capaldi - Someone you Loved
Tom Walker - Just You and I
Sam Smith and Normani - Dancing with a Stranger
Stormzy - Vossi Bop
International female
Ariana Grande
Billie Eilish
Camila Cabello
Lana Del Rey
Lizzo
International male
Bruce Springsteen
Burna Boy
Tyler, The Creator
Dermot Kennedy
Post Malone
Best album
Stormzy - Heavy is the Head
Michael Kiwanuka - Kiwanuka
Lewis Capaldi - Divinely Uninspired to a Hellish Extent
Dave - Psychodrama
Harry Styles - Fine Line
Rising star
Celeste
Joy Crookes
beabadoobee
THE SPECS
Engine: 1.5-litre, four-cylinder turbo
Transmission: seven-speed dual clutch automatic
Power: 169bhp
Torque: 250Nm
Price: Dh54,500
On sale: now
MATCH INFO
Wales 1 (Bale 45 3')
Croatia 1 (Vlasic 09')
Innotech Profile
Date started: 2013
Founder/CEO: Othman Al Mandhari
Based: Muscat, Oman
Sector: Additive manufacturing, 3D printing technologies
Size: 15 full-time employees
Stage: Seed stage and seeking Series A round of financing
Investors: Oman Technology Fund from 2017 to 2019, exited through an agreement with a new investor to secure new funding that it under negotiation right now.
VEZEETA PROFILE
Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
Funding: $22.6 million (as of September 2018)
Investors: Technology Development Fund, Silicon Badia, Beco Capital, Vostok New Ventures, Endeavour Catalyst, Crescent Enterprises’ CE-Ventures, Saudi Technology Ventures and IFC
The stats
Ship name: MSC Bellissima
Ship class: Meraviglia Class
Delivery date: February 27, 2019
Gross tonnage: 171,598 GT
Passenger capacity: 5,686
Crew members: 1,536
Number of cabins: 2,217
Length: 315.3 metres
Maximum speed: 22.7 knots (42kph)
UAE currency: the story behind the money in your pockets
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
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Read more from Aya Iskandarani
The five pillars of Islam
Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
