Nathan Sheets Discusses the World Economic Outlook for 2023
On February 6, the Georgetown Americas Institute hosted Nathan Sheets to hear his perspectives on the global economic outlook for 2023.
The world entered the new year with positive news from China and the United States that may alter the course of the world economy following a year of war and rising inflation. To discuss how these emerging dynamics will affect the global economic outlook in 2023, GAI hosted Nathan Sheets, global chief economist at Citigroup and former undersecretary for international affairs in the U.S. Treasury under President Barack Obama.
China, the United States, and Beyond in 2023
A series of significant developments in the last six weeks have slightly brightened the economic outlook for 2023. Recent data on mobility and consumption from China indicates that the country’s outlook has improved as people spend more on goods and services such as restaurant dining and theater tickets following years of strict lockdowns. China’s leadership however has recurrently imposed restrictions in the face of emergent crises, such as the pandemic.
In Europe, a warmer than usual winter has mitigated the impact of the energy crisis that followed the Russian invasion of Ukraine. As such, the European economic contraction will be less severe than originally envisioned, and regional economies are now expected to stagnate rather than contract for the next few years. The Euro area is predicted to grow by 0.6% in 2023 and 0.9% in 2024, according to Citigroup data.
In the United States, rising demand for services has led to significant job creation. Inflation on the other hand remains a concern and Sheets believes that meeting the Federal Reserve’s 2% target will be challenging.
“The number one concern I have about this global outlook is inflation. Are we really returning to a low inflation world?” - Nathan Sheets
There are a number of issues that will be key to keep track of in the medium-term, five to ten years. An aging population, high public debt, and the effects of deglobalization could hamper growth. Among potential solutions, Sheets highlighted innovation and productivity along with the effects of moving toward a net-zero economy.
“The good news is that it does not look like all of the major economies are going down together.” - Nathan Sheets
Implications for Latin America
Speaking about Latin America, Sheets commended the region’s resilience in the face of an unstable world. Markets such as Mexico and Brazil averted recessions that previous assessments had envisioned for 2022. Investors are now waiting for risk to fall so they can rush back into these economies.
“Latin America has performed remarkably well given the significant tightness of the Federal Reserve and the world.” - Nathan Sheets
GAI founding director Alejandro Werner, on the other hand, explained that he believes the picture to be more complex.
Director David Vandivier of the Psaros Center for Financial Markets and Policy provided the opening remarks while Werner moderated the discussion. The event was co-sponsored by the Psaros Center, which functions within the McDonough School of Business.
You can find the full recording of the event on our YouTube channel here.