What does the US economic outlook look like in 2023? And what about the Arab region?

Washington

- According to a number of recent analyses, it is widely expected that the US economy will witness a state of recession during the year 2023, mainly for domestic reasons, as well as the uncertainty about the global economic outlook due to its connection to the ongoing war in Ukraine, and the confusion of the process of reopening the Chinese economy in general. Complete after covid-19 lockdowns.

Many experts do not argue with the inevitability of the economic recession, but they do not agree on whether the recession will be moderate, simple, or strong and confusing.

Through a question and answer, Al Jazeera Net is trying to extrapolate the horizon of the US economy in the new year 2023.

How can the state of the US economy be described in 2022?

Confronting inflation and the efforts of the Federal Reserve Bank (US Central Bank) to confront the rise in its rate to record rates, the highest in 40 years, are the most important characteristic of the US economy during the past year.

The annual rate of price increase was no more than 6% last January, but it reached 9% last November, and starting in March, the Federal Reserve Bank began a dramatic series of interest rate increases, from 0.0% in at the beginning of the year to between 4.0% and 4.5% at the end of the year.

There is no single reason behind the rise in prices in the United States, but most economists believe that the massive government spending, which has exceeded $ 5 trillion so far since the start of the Covid-19 pandemic, is the direct cause of the rise in inflation and the increase in prices.

What did Joe Biden do to combat inflation and price hikes during 2022?

Biden was quick to say that confronting high inflation is his top priority, and instructed the National Economic Council to work to reduce prices, including energy prices, and instructed the Federal Trade Commission to address any price manipulation.

Biden indicated that the rise in consumer prices is related to the delay in the global supply chain, which has caused a significant shortage of consumer goods in the markets.

Biden believes that the infrastructure bill and the inflation reduction law passed by Congress during 2022 will help mitigate the effects of high prices on millions of American families.

Did all Americans feel the economic hardship?

Yes, all Americans felt the rise in prices, but the degree of suffering differed according to the diverse financial situation of the families, and the presence of cash savings (as a result of the huge spending and subsidies that most Americans received after the Covid-19 closures) helped millions of Americans absorb the shock of the price hike.

On the other hand, the rapid and significant deterioration in the stock market led to 59% of Americans losing between 20% and 40% of their retirement accounts during 2022.

As various American companies and institutions invest the savings of pension funds in the financial markets, they blame President Joe Biden and his Democratic Party's mismanagement of the economy and underestimating the importance of many warnings of the danger of inflation.

What are the signs of the US economy approaching recession?

Historically since 1948, and every time the gross domestic product declined by at least two consecutive quarters within one year, the country was declared entering a stage of economic recession, but the White House refused to take this path after growth rates recorded a decline in the second and third quarters of 2022, He justified this by saying that the comprehensive economic data related to the labor market, unemployment, the volume of consumer and commercial spending, industrial production and income rates must be included within the real definition of recession.

What is the US central bank's philosophy on facing inflation?

The Fed's intervention aims to change consumer incentives, by making savings rates more attractive and borrowing rates less attractive.

The central bank reduces demand, thus slowing down the rate of price increase.

In general, the US Federal Reserve views an annual inflation rate of 2% as healthy, and considers that to be its long-term goal.

Is a US recession in 2023 inevitable?

The Federal Reserve aims to control inflation without plunging the economy into a harmful recession, and while a number of economic indicators suggest that efforts to slow demand may be working, the threat of recession still looms large.

Data from the Ministry of Commerce showed - at the end of last November - that commercial activity in the United States shrank for the fifth month in a row, as companies interacted with lower consumer demand.

Although the economy has continued to add jobs in recent months, applications for unemployment benefits are still on the rise, which indicates a possible downturn in the labor market.

The Federal Reserve also published last month the minutes of the Federal Open Market Committee meeting, which revealed a pessimistic view among economists at the central bank regarding the expectations of the performance of the US economy during the next year.

Among their findings was that they "considered that the possibility of the economy entering a recession sometime during the next year is almost highly likely."

A “large majority” of the voting members of the committee indicated that they believed it was time to slow down the rate of interest rate increases, which is what happened from the Federal Open Market Committee, which retracted the traditional increase by 0.75% as it did 4 times in 2022, to raise it in December. This December, by only 0.5%.

How will the US economy affect Arab economies in 2023?

Raising the US interest rate is reflected in the Arab economies through: