Global, regional, local trends for 2023
Although economic predictions are usually reserved for the foolhardy, as the future is always difficult to ascertain, there are certain trend lines and probabilities that can be discerned at the global and regional level as well as the local level here in Thailand. As a year-end exercise, we can tease out a few contours with a reasonably high degree of probability.
In 2023, global economic headwinds will likely gather pace as years of undisciplined central banking and ultra-low interest rates necessitate monetary policy tightening worldwide. Higher interest rates to forestall inflationary pressure will be compounded by higher prices of petrol and natural gas, partly owing to Russia’s aggression against Ukraine earlier this year and the consequent energy squeeze. For most of the past two decades, ultra-low interest rates have led to rising inequality and polarisation that underpinned the Arab Spring, the resurgence of populism, and mass protests around the world. Wealthy elites and big corporations were able to tap oceans of risk-free capital at the expense of ordinary people’s savings. This intoxicating period of easy money is likely to be followed by hard times.
Despite high Covid-19 caseloads, China will continue to fully reopen next year under domestic pressure and international imperatives to reengage with the outside world. The Chinese economy is likely to benefit from a post-pandemic bounce while the geostrategic competition and decoupling between China and the United States will intensify.
In fact, we have already seen from the recent meeting between President Joe Biden and President Xi Jinping on the sidelines of the G-20 summit in Bali that this superpower competition is here to stay for the long haul. The Xi-Biden talks, however, provided a guardrail by committing to competition while emphasising the mutual aim of avoiding outright conflict.
In addition, the US-China tension and confrontation will heighten because of domestic politics in both countries. As the US is not facing an election year in 2023, the Biden administration is likely to redouble the efforts behind its Indo-Pacific strategy, which views China as a rival and competitor. This means US policy initiatives, such as the Indo-Pacific Economic Framework, will receive more attention and be given more thrust in terms of implementation.
On the other hand, President Xi’s third term and seemingly indefinite rule will likely lead to China’s doubling down on its Belt and Road Initiative and geo-economic manoeuvres, particularly in supply-chain security.
The US-China face-off is fast becoming a disguised economic war, focusing on cuttingedge technologies and securing supply chains. China has the advantage of being a totalitarian state which can command governmentbusiness cooperation and coordination at will. The US will increasingly try to match these government-business linkages with an industrial policy of its own. Southeast Asia, and other countries and regions, will face the dilemma of being pressured to choose
between technologies, firms, and investments from either the US or China.
The more immediate geostrategic concern revolves around Russia’s ongoing invasion of Ukraine. As it approaches the one-year anniversary on Feb 24, this war has proceeded in unanticipated directions. Ukraine President Volodymyr Zelensky has been no pushover.
Meanwhile, Russia’s initial military advance looked spectacular and muscular, but it did not lead to a precipitous collapse of Mr Zelensky’s government. In fact, Mr Zelensky stood his ground in the face of the Russian march towards Kyiv, the Ukrainian capital. He also turned down Western countries’ offers of sanctuary and personal safety. Mr Zelensky’s bravery, critically aided by the West’s supply of weapons and ammunition, eventually turned the tide of the war and reduced Russia’s aim from regime change to a limited annexation of parts of eastern Ukraine.
At the same time, Western sanctions against the Russian government have not brought Russian President Vladimir Putin and his regime to heel. Mr Putin has proved more resourceful and resilient than expected, and he has exploited global cleavages that resulted in the United Nations’ condemnations of both Russia’s aggression and annexation with a significant number of abstentions, including China and India. Despite presumed domestic pressure against the costly and unsuccessful war he instigated, Mr Putin seems to be holding ground at home. After months of military clashes, Mr Zelensky’s regime has survived, whereas Mr Putin’s has not buckled.
As a result, the Russia-Ukraine war has reached a stalemate of sorts. Four easternmost Ukrainian areas are now the main war zone, with the Ukrainians trying to take them back and the Russians taking and linking them to Crimea, which Russia annexed from Ukraine in 2014. In 2023, an endgame to this conflict will increasingly emerge. A deal-making settlement could involve the status of eastern Ukraine being under de facto Russian control without international legitimacy and recognition. A deal-breaking situation would involve Ukraine trying to take back not just its eastern parts but also Crimea.
Nearer to home, Southeast Asia and Asean will remain divided over the US-China confrontation and Russia’s war in Ukraine. More immediate and consequential to Asean will be Myanmar’s military coup and civil war since Feb 1, 2021. As the Myanmar coup and Asean’s chief conundrum goes into its third year, this internal conflict will be a litmus test for the regional organisation. Next year is crucial because Indonesia will assume the annually rotating chair of Asean. If there is no progress in brokering dialogue and bringing Myanmar’s civil war to a halt with Indonesia as chair — the bloc’s largest and most influential member state — then Asean will lose more of its central role as a regional promoter and platform for peace and prosperity.
Based on its constitutional provisions, Thailand is due to hold an election by May 7, 2023. That many doubt whether a poll will indeed take place next year already speaks volumes about the political direction of this country. In all likelihood, the election timetable will likely stay on track because the cost of derailing or delaying it is much greater for the powers that be than the cost of having and holding it. Discerning the upcoming poll outcomes can be benchmarked with the parliamentary numbers that came out of the March 2019 election.
While the main parties and power holders that make up the current coalition government will need to stay on top at all costs because they are propping up and underpinning the ruling conservative-royalist-military regime, the price for them will be higher because public sentiment and voting patterns have been favouring the current opposition parties. The kind of manipulation and distortion seen in the March 2019 poll will thus likely be more blatant.
But if the winning margins are too big and convincing to shave, invalidate or annul, Thailand will have to hope for a compromise whereby the largest winning party gets to govern but not necessarily with a prime minister of its own choosing.