Will the Ukraine war end? Will there be a recession?: Predictions for 2023

Finally, 2022 is behind us. But what does 2023 have in store? Hopefully, the Ukraine war will end and Twitter will see stability under a new CEO. It might not all be good news. The global economy could slip into a recession and the rising tension between China and Taiwan is worrying

It’s 2023 and many of us are hoping it will bring far better news that the fateful last year. From Russia’s invasion of Ukraine to Elon Musk’s takeover of Twitter, 2022 can best be described as topsy-turvy. There were more downs than ups.

Now, the New Year has finally kicked off – and with it the hopes that it will bring some cheer. Which way will the war go? Will there be more conflict? What will happen to Twitter? And what is India’s plan for the year?

We take a look at what could happen over the next 364 days.

Ukraine war enters a new phase – or ends

Russia’s invasion of Ukraine in February 2022 was arguably the biggest story of the year. Moscow was initially confident its “limited action” would easily roll up the Ukrainian military and that troops would be in Kyiv in a matter of days.

That didn’t happen. Instead, it turned into a battle of attrition with thousands of Russian troops reportedly dead and Ukraine taking back hundreds of square miles.

Now, with Washington providing its “Patriot missiles” to Kyiv and Putin vowing to knock them down, the war could be entering a dangerous new phase. Some say it could escalate.

On the other hand, with a stream of reports of Putin being ill – the latest that he is being treated for cancer with Western drugs – and some speculating that 2023 might even be his last year in power, the Ukraine war could come to an end in 2023.

Will the world slip into recession?

The big, unanswered, some may say the unknowable question.

Some, like the UK-based economics consultancy Centre for Economics and Business Research (CEBR), suggest a recession is very likely.

“It’s likely that the world economy will face recession next year as a result of the rises in interest rates in response to higher inflation,” Kay Daniel Neufeld, director and head of forecasting at CEBR, was quoted as saying by Bloomberg.

The report added that the battle for inflation will continue and that central bankers, regardless of economic costs, would stick with what they know.

US economists in a poll estimated the likelihood of a recession at 70 per cent.

To be fair, the Wall Street Journal noted that economists entirely missed the 1990, 2001 and 2008 downturns.

However, the newspaper in its own poll placed the number of economists who think a recession is looming at 63 per cent.

Others, including US treasury secretary Janet Yellen consider the recession ‘not inevitable’ and such predictions entirely too premature.

A piece in The Guardian argued that though tough times seem ahead for the global economy, even taking into account the two-consecutive quarter of negative growth criteria, the slump will not turn into a recession.

Budget 2023-2024

With India slated to go to the polls in 2024, all eyes will be on the 1 February, Union Budget – the last full budget the present Narendra Modi government can present.

Despite the past two years of COVID-19 having affected the middle class and salaried, finance minister Nirmala Sitharaman has to trod a more cautious path.

Now, Sitharaman might take the leap on a few long-standing demands such as increasing the basic exemption limit and the threshold limit for the highest tax slab.

Experts also say India needs to widen its tax base and do away with cess and surcharge.

Sanjay Baru, ex-media advisor to Manmohan Singh told The Economic Times, “In India only a small percentage pays taxes. If we compare our Tax GDP ratio with other rapidly developing economies it is below par. We also need to leverage technology to cast the net wider and increase compliance. Predictability in the taxation system is equally important to ensure compliance.”

2023 elections in India

Nine states are set to hold crucial Assembly polls in 2023 – the ‘semi-final’ ahead of the blockbuster 2024 general elections.

Rajasthan, Chhattisgarh, Madhya Pradesh, Karnataka, Telangana, Tripura, Meghalaya, Nagaland and Mizoram – and maybe even Jammu and Kashmir – are set to go to the polls this year.

Will the BJP continue to be dominant? Will Prime Minister Narendra Modi’s much-vaunted magic at the polls continue to hold sway?

“If the BJP, by and large, does well in most states, PM Modi will get the credit, and election experts will talk about how there is no alternative to him, his charisma, or his planks of Hindutva and nationalism,” this India Today piece noted.

On the other hand, what about Opposition unity? Who, if anyone, will emerge as the figure to take on Modi on the national stage? Will it be AAP’s Arvind Kejriwal? TMC’s Mamata Banerjee? Or perhaps wily veteran Sharad Pawar?

Will the Congress be able to recapture its lost touch at the polls?

The India Today piece noted that if the Congress does well at the polls – it is currently in power in Rajasthan and Chhattisgarh – Rahul Gandhi’s Bharat Jodo Yatra will get the credit. That could see the party aim to head up the Opposition rather than just being part of it.

“Conversely, such a scenario may also intensify the chorus for opposition unity, which ultimately may not come about, given the fiercely personal ambitions of anti-BJP leaders,” the piece noted.

Regardless, 2023 promises to be an interesting year for poll watchers.

The future of Musk, Twitter, Tesla

With Elon Musk already announcing that he will step down as Twitter CEO once he “finds someone foolish enough to take the job”, the company’s wild ride is expected to end in 2023.

Expect something resembling normalcy – or whatever passed for normalcy on the app to return if a more conventional CEO is at the helm. Advertisers then are likely to trickle back.

Those with a vested interest in seeing Tesla do well may also find cause for joy.

Musk’s chaotic stint at the social media giant caused Tesla shares to fall off a cliff in 2022. The automotive and clean energy company’s shares are down 60 per cent since April, causing hundreds of millions of dollars of shareholder value to be wiped out.

If Musk departs from Twitter, though he will no doubt retain controlling interests and direct the company’s future, he will let many breathe easier.

Metaverse might take a step forward… or sideways

Thus far, Mark Zuckerberg’s ten billion dollars on the Metaverse has not paid off.

The company Meta, formerly Facebook, was forced to lay off 11,000 employees after a mea culpa from Zuckerberg.

Though the company’s plans for the Metaverse stumbled in 2022, Zuckerberg and other top executives like Meta CTO Andrew Bosworth have stuck to their guns.

Bosworth, in a memo posted on social media, said the company is going ahead with its plans to build new AR/VR technologies.

“We never thought it would be easy or straightforward, but this year was even harder than we expected,” wrote Bosworth. “Economic challenges across the world, combined with pressures on Meta’s core business, created a perfect storm of scepticism about the investments we’re making. These are moments that truly test people’s belief in the future.”

Others think Zuckerberg may carve out the Metaverse away from his other core, profitable businesses in the backdrop of organisations tightening up on spending in 2023.

“Rather than make Meta shareholders collectively pay for Zuckerberg’s ambitions, he could fund them himself through dividends from the parent company. If all the cash flow from operations went back to shareholders, representing about $18 a share, Zuckerberg would find himself with some $6 billion to reinvest in the project based on his stake. That’s not enough given current spending plans, but a few key investors who sign on to his vision might be keen to invest alongside him,” a Reuters article noted.

And even if the company Meta stumbles, other titans such as Apple and Sony are set to bring their own virtual reality sets to market – even if Apple CEO Tim Cook is yet to even utter the term “metaverse”.

China vs Taiwan: Another war in the making?

Will 2023 be the year China invades Taiwan? Some think so.

After all, China has for years vowed to “reunification” – through the use of force if need be.

And what better way for President Xi Jinping, now facing troubled waters at home after doing a U-turn on the zero-COVID strategy, to rally sentiment in his favour?

While the US has vowed to take pre-emptive measures, some say China now has enough firepower to challenge Washington in the Indio-Pacific.

Politico quoted Mike Gallagher, the incoming chairman of the US House Select Committee on China, as saying, “We have a rhetorical commitment to a force posture change in the Indo-Pacific, but that’s belied by the reality of what’s actually happening.”

“Until you turn all this happy talk about arming Taiwan into reality, you’re going to be in a precarious position with respect to near-term deterrence over Taiwan,” Gallagher added.
A war over Taiwan, a major producer of semiconductors, could also potentially crash the global economy.

India’s ties with the US

As previously noted, 2022 was a banner year for the relationship between India and the United States. Not only did US president Joe Biden meet Prime Minister Narendra Modi twice but External Affairs Minister S Jaishankar also met Secretary of State Antony Blinken.

The year also saw a slew of tangible outcomes including record trade numbers, market access issues being resolved, the first-ever maintenance of a US naval ship in India, the Quad focus on STEM, the signing of an Investment Incentive Agreement, and the launch of Technology Innovation Hubs as a collaboration of the respective science agencies.

Though US Congress is divided with the Democrats holding the Senate and the Republicans holding the House, both parties remain extremely bullish on India – as does the White House.

This sentiment was echoed by Principal Deputy National Security Advisor Jon Finer, who in November said 2023 was going to be an even bigger year for the relationship between the countries than 2022.

The top White House official pointed to the upcoming Quad Summit, India’s G20 presidency, the launch of India US CEO dialogue as well as critical and emerging technology dialogue early in 2023.

Finer said the entire administration and the president see this “as among the most consequential relationships for the US anywhere in the world, but also almost uniquely one of the relationships that still retains some of the greatest potential to continue to evolve and strengthen and improve”.

India signs more FTAs

In 2022, India signed two major free trade agreements (FTAs) with Australia and the United Arab Emirates and remains in negotiations with the UK.

Expect New Delhi to sign at least one more FTA – if not two in 2023.

Commerce minister Piyush Goyal himself said as much at a press conference – that negotiations are scheduled with the UK, European Union and Canada.

He further noted that India had signed trade agreements with 13 of the 15 countries in the Regional Comprehensive Economic Partnership (barring New Zealand and China) – which India walked away from in 2019.

“India today works from a position of strength, we negotiate with confidence,” Goyal added.

With inputs from agencies

This article originally appeared on https://www.firstpost.com/ and was reproduced here with permission