Farming News - GLOBAL ECONOMY SET TO ENTER RECESSION IN 2023 – THE SMART CUBE COMMENTS
GLOBAL ECONOMY SET TO ENTER RECESSION IN 2023 – THE SMART CUBE COMMENTS
According to organisations such as the World Bank, Bank of America and Citi, as well as various economists, it is expected that the global economy will enter into a recession this year. A combination of factors has led to this global economic downturn, ranging from the ongoing Russia-Ukraine war and constriction of macroeconomic policies, to the current European energy crisis and the prolonged periods of supply disruption caused by the COVID-19 pandemic.
The US and European economies are expected to be the most heavily impacted by a recession this year. The USA’s real GDP growth is expected to be 0.0 per cent Year-over-Year (Y-o-Y) in 2023, while the real GDP of Europe – including the UK – is predicted to come in at 0.1 per cent this year. Nevertheless, it must be noted that the degree of recession is still being debated, and the actual economic impact remains under close observation as market conditions continue to change.
Rashi Singh, AVP, procurement and supply chain at The Smart Cube comments on what impact a potential recession in 2023 could have across different sectors:
"A possible recession in 2023 is likely to significantly impact the CPG sector. In the upcoming months, high levels of volatility are expected when it comes to the prices of dairy and agricultural commodities as a result of recessionary pressures. It is also likely that food service firms will record a fall in sales figures. The expectation is for consumer preferences to transition from away-from-home to at-home food due to the expected decline in real personal income, resulting in decreased demand for food services in 2023.
"A recession is also likely to affect fertiliser prices. Prices are expected to be high amid expected continuation of the Russia–Ukraine war, growing fears of an economic slowdown and constrained fertiliser supply – which is set to significantly impact planting decisions for the year ahead. What's more, the volatility in the oil and gas sector is likely to have an impact on the fertiliser market as well. Nitrogen-based fertilisers, such as urea and ammonia are expected to trade at high prices in the upcoming months.
"Nevertheless, food and beverage firms are unlikely to be heavily impacted by a potential recession, due to the expectation that demand for grocery and staple goods will remain resilient, irrespective of the economic crisis."
“Meanwhile in the industrial sector, there is a high likelihood of semiconductor and electronic shortages easing as end-user businesses that stockpiled chips during the COVID-19 pandemic are cancelling or delaying orders to reduce inventory in case a recession takes place in the coming months. Additionally, while it’s expected that the demand for automobiles will fall during the recession – amid the potential decline in personal income – this won’t necessarily be the case. Industry growth is expected to be sustained this year due to the backlog of demand for automotives since the start of the pandemic.
“Finally, the logistics industry is not immune from being impacted by a recession. Expected fall in average annual price of oil and decline in manufacturing activities in 2023 because of the potential decline in consumer spending, is likely to lower down demand for logistics.”
Please let me know if you would like to further comment, or to speak to Rashi about the impact a recession will have on different industries, as well as key mitigation strategies businesses should adopt to limit the impact of a recession.