[Seoul Finance Hub, financial expert column]Chung Yoo-tak, a researcher at Hana Financial Management Research Institute, 

2023, 3rd High Aftermath Comes

Global inflation hit its highest level since the 1980s in 2022, with unexpected wars in Russia and Ukraine amid continued supply chain disruptions after the pandemic and recovery in demand. To cope with such a surge in prices, central banks in major countries have implemented unprecedentedly strong monetary tightening, which has increased volatility in the global financial market. In particular, in the case of the Fed, the dollar showed an unrivaled strength by carrying out aggressive monetary tightening, such as raising its key interest rate by 425 basis points in 2022 alone.

The three high prices of high prices, high interest rates, and high exchange rates are expected to gradually ease in 2023, thanks to expectations of passing inflation highs in major countries and adjusting the pace of monetary tightening accordingly. However, this year's 3rd high phenomenon is expected to be relatively eased compared to 2022 and still higher than in the past. In particular, it is worth paying attention to the possibility that the ripple effect of the three high phenomena, such as slowing growth, credit risk, and uncertainty in structural changes, will begin in earnest this year. If 2020-2021 was "Great Lockdown" and 2022 was "Great Inflation," 2023 is expected to highlight "Great Aftermath."

First of all, a slowdown in global growth is expected to be inevitable in 2023, given the time lag of monetary policy ripple and the special disappearance of reopening. In general, the monetary policy shock, or the shock of interest rate hikes, is likely to peak after about a year, so the slowdown in growth is likely to begin in earnest this year. In addition, the gradual disappearance of the reopening effect internally and externally will also serve as a factor that expands the negative effects of inflation and monetary tightening.

While major research institutes anticipate a slowdown in the global economy, they are still weighing the possibility of a "economic slowdown" rather than a "economic recession." Generally, a global growth rate of less than 2 percent is considered a recession, but the IMF (October 22) is currently 2.7 percent and the OECD (November 22), 2.2 percent, predicting global growth this year. This judgment is due to good household financial soundness and employment conditions after the pandemic, and expectations for a rebound in China's growth rate due to the resumption of economic activities.

However, it should be noted that the risk of stagnation is increasing as anxiety factors overlap amid the sluggishness of major countries. Unlike past global economic slowdowns such as the Asian financial crisis ('98) and the European fiscal crisis ('12), it is not easy to ease negative shocks as major economies contract at the same time. In addition, the prolonged Russia-Wu war, instability in China's transition to With COVID-19 and continuing real estate stagnation, and uncertainty in the direction of U.S. monetary policy are also acting as destabilizing factors.

More details: Korea Financial Times (https://www.fntimes.com/html/view.php?ud=202301111150216579c1c16452b0_18)