Last year was a disastrous year for financial markets. We had the coronavirus with its impact on the economy. Then we had the Russian invasion of Ukraine. Then we had an increase in the rate of inflation, followed by an increase in interest rates. Financial markets are now slowly picking up but, as expected, an economic slowdown is starting to bite into some of the world’s leading economies.

Some analysts are forecasting that this slowdown will be short-lived, which is not a bad thing. However, inflation still needs to be kept under control and supply chains have not been fully restored after the pandemic. Therefore, it is pertinent to ask the question as to what can be expected post-2023, if the current scenario does not change much, such as an abrupt end to Russia’s invasion of Ukraine.

The reason for this question is that businesses need to drive the next economic upturn. Governments did all they could to keep their economy afloat during the pandemic. Their resources to drive an economic upturn are thus now quite limited. Admittedly, several businesses also got heavily indebted during the pandemic, but I believe that from now on, they need to be locomotive for the global economy.

The geopolitical scenario keeps evolving and in post-2023 there could be some important developments. Elections for the European Parliament are set for May 2024, and a new president for the European Commission will be elected for the following five years. If there is a change in the presidency, how will the policies of the EU evolve?

The US presidential elections will also be held in November 2024. It is not yet known who the contestants will be, but the battle lines are already being drawn. Will there be a change also here? In the meantime, there are discussions on the US debt ceiling as President Joe Biden and the Republicans, who enjoy a majority in the House of Representatives, have locked horns.

We need to add the tensions between China and part of the Western world, arising from all sorts of issues. If it is not Taiwan, then it is TikTok, and if it is not TikTok, then it is something else. The reality is that China is still essential for global economic growth, just as the US or Germany is. Therefore, uncertainties caused by the geopolitical situation will not be in short supply.

Within a business environment, there is the fear that inflation will be quite sticky. Consumer prices will not go down as fast as we wish them to, thereby keeping interest rates up. In all the leading economies, there is talk of a skills shortage in both qualitative and in quantitative terms and there appear to be no solutions in sight on how to address this issue. Both these factors could lead to an increase in incomes, which have been fairly flat in real terms for the last 10 to 15 years.

This means that the key to growth is productivity. Both individual companies and countries need to find ways and means of how to enhance their productivity. Moreover, will businesses focus more on revenue growth or on increased profitability?

Where does Malta fit into all this? One figure says it all. Exports of goods and services represent 168 per cent of the gross domestic product. Therefore, what happens beyond our shores has a significant impact on a large part of our economy. The fortunes of most businesses operating in Malta, from tourism to manufacturing, to a range of ICT, financial, maritime, aviation and other services (but not construction and real estate) depend on global developments. This would in turn have a consequence on the wealth and employment we generate in this country.

Therefore, we also need to look at post-2023 and understand what is happening and determine what we can do about it.

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