Economic Insights: 2023 end-of-year compendium

That the world has become more volatile over the early 2020s is, at best, an under-statement. After the pandemic and then (ongoing) war in Ukraine, this year has brought another crisis with, beyond the human tragedy of those directly involved, global ramifications: the outbreak of war in the Middle East.  All along, tensions between the US and China remain strained, and the still running cost-of-living crisis has added to and sustained the high-risk premium of geopolitical circumstances

This compendium contains all the 2023 editions of our Economic Insights (EI) series. The main economic story of the year has been the stubbornly high levels of inflation, which have delayed the start of the widely anticipated interest rate cutting cycle in advanced markets. Interest rates in the US and Europe have likely peaked, but first cuts remain pending. In Asia, however, a strong US dollar leaves upside risk of rate hikes.

Stronger-than-expected economic growth, notably in the US, further justified central banks' decisions to not cut interest rates. We expect global growth to slow next year.  The US economy is still growing, but we maintain our forecast of 1.1% real GDP growth in 2024 (down from an estimated 2.3% in 2023). In Europe, signs of stagnation, if not recession, are already showing in some economies, and China is grappling with domestic structural growth challenges.

The higher-for-longer interest rate environment has supported insurance sector profitability by delivering healthier investment returns. And in life insurance, high rates have supported demand for savings-type products. In non-life, inflation has translated in higher claims costs for Property and Casualty insurers, with property and motor business most exposed. As a result, and with inflation pressures still present, we expect hard market conditions to continue into next year.

Read more about these and other topics this year's EI compendium, which also includes a crossword puzzle for some end-of-year light relief. The answers will be published alongside the first EI of 2024.