The main events in finance and economics in 2023

The departing year has been a period of instability for the global economy: inflation, rising interest rates, labor market tensions, and geopolitical upheavals have impacted forecasts and caused uncertainty.

Considering the multitude of events requiring attention, we have gathered the most significant and popular news of the year in one place.

1. Utilization of Interest Rate Hikes to Tackle Inflation

Central banks worldwide in 2022 and 2023 raised interest rates in an attempt to curb inflation, considering the need to maintain economic growth.

• The Federal Reserve of the United States began raising interest rates in March 2022. By the end of 2022, rates had increased from 0 to 0.25% to 0.75% to 1%. In 2023, the Fed continued raising rates, reaching 1.5% to 1.75% by the end of June.
• The European Central Bank also initiated interest rate hikes in July 2022. By the end of 2022, rates had increased from -0.50% to 0%. In 2023, the ECB plans to continue raising rates, with rates potentially reaching 1% by year-end.

Nevertheless, many central banks do not rule out the possibility of further rate hikes in the upcoming year if necessary, as explained in this overview.

2. Silicon Valley Bank Collapse

On March 10, 2023, Silicon Valley Bank (SVB), one of the largest banks in the Silicon Valley, declared bankruptcy. This marked the largest banking bankruptcy in the U.S. since the 2008 crisis.

The reasons behind SVB's bankruptcy encompassed several factors, including:

• Slower growth rates in the technology sector. In recent years, the technology sector had experienced robust growth, but in 2023, growth rates decelerated. This led to a reduction in SVB's revenues and profits as it was a primary lender to technology companies.
• Rise in interest rates. The U.S. Federal Reserve began increasing interest rates in an attempt to control inflation. This resulted in increased costs for loans for companies and individuals. SVB, like other banks, was compelled to raise interest rates on loans, leading to a decline in its revenues.
• Cryptocurrency market crisis. SVB was a significant investor in cryptocurrencies. The decrease in cryptocurrency values resulted in losses for the bank.

The collapse of SVB had a widespread impact in the financial world, raising concerns about the stability of the U.S. banking system and undermining investor confidence in the technology sector.The consequences of SVB's bankruptcy could be significant. The bank was a key player in the Silicon Valley, and its departure could limit technological companies' access to financing, potentially impacting the growth rates of the tech industry.Moreover, SVB's bankruptcy could have implications for other banks that also extended credit to technology companies. These banks might face financial difficulties if technology companies struggle to service their debts.

Overall, SVB's collapse sends a troubling signal to the global economy, highlighting that even the most successful companies can be vulnerable to economic upheavals. This event marks the third-largest banking bankruptcy in U.S. history.

3. Central Bank Digital Currencies (CBDCs)

Technologies are changing many aspects of modern life, including global financial systems.In this context, much has been discussed regarding Central Bank Digital Currencies (CBDCs), encompassing issues such as data security and what sets them apart from other digital currencies.A Central Bank Digital Currency (CBDC) is a digital version of a national currency issued and regulated by the central bank. CBDCs represent a new form of money that may offer several advantages compared to existing forms of money, such as cash and non-cash money.

Advantages of CBDCs:

• Enhanced speed and efficiency of payments. CBDCs can be transferred instantly and at low costs, potentially making payments faster and more efficient.
• Increased security. CBDCs might be more secure than existing forms of money as they can be protected against fraud and hacking.
• Expanded access to financial services. CBDCs could make financial services more accessible to individuals who do not have access to traditional banking services.

Development of CBDCs:

Central banks in many countries worldwide are exploring the possibility of issuing CBDCs. Currently, CBDCs have been issued or are in development stages in several countries, including China, the Bahamas, Cameroon, Switzerland, and Sweden.

Outlook for CBDCs:

It is unclear whether CBDCs will become widely adopted. However, they have the potential to change the way money is used.

4. Economic Outlook for 2024

It has been an unstable and unpredictable year for the global economy. Geopolitical disruptions have created significant uncertainty, but there are glimpses of positivity, such as a decrease in inflation.

Factors that may impact economic development:

• Progress of Russia's military actions in Ukraine. If the war concludes in 2024, it might lead to a decrease in energy and food prices, potentially stimulating economic growth.
• Effectiveness of central bank policies. If central banks manage to control inflation without significantly slowing economic growth, it could contribute to economic expansion.
• State of the global economy. If the world economy maintains stable growth rates, it will contribute to the growth of both developed and developing countries' economies.

Overall, it is anticipated that global economic growth in 2024 will decelerate compared to 2023. However, if no new serious disruptions arise, economic growth is expected to remain positive. Nonetheless, over 60% of respondents have stated their expectations for a weakening global economy in 2024.

5. Jobs, Growth, and Opportunities

The ongoing COVID-19 pandemic, the war in Ukraine, and other factors have led to increased inflation, slowed growth rates, and rising unemployment. However, despite this, the job market, in general, remains stable, with some industries and professions demonstrating consistent growth.

Labor market trends in 2023:

• Increased demand for skilled labor: With the economy's automation and digitization, there is a growing demand for skilled professionals possessing expertise in areas such as information technology, engineering, healthcare, and education.
• Rise in employment flexibility: Flexible forms of employment, such as freelancing, remote work, and part-time work, are becoming more popular.
• Transformation of traditional professions: Many traditional professions are evolving due to new technologies and labor market realities. For instance, sales professionals are increasingly using digital tools, while service industry workers are more frequently interacting with clients remotely.

Skills for the future:

In an ever-evolving world, skills enabling adaptation to new conditions and demands are becoming increasingly critical. Such skills include:

• Creativity and critical thinking: Necessary for solving new problems and tasks.
• Communication and collaboration: Essential for teamwork and effective interaction with others.
• Lifelong learning ability: In today's world, knowledge becomes outdated quickly, making it crucial to be able to learn new things and adapt to new conditions.

The job market remains stable but is simultaneously transforming due to the influence of new technologies and realities. Both employers and employees need to adapt to these changes and develop skills essential for success in the future.

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Conclusion

Approaching the end of 2023, we look back at a challenging year for the global economy. Headlines in the realms of economics and finance ranged from banking collapses to tightening labor markets and advancements in artificial intelligence.