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FT writers’ predictions for the world in 2023

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Like many observers, the FT got its biggest call for 2022 wrong. Though we acknowledged it might be wishful thinking, our Europe editor Ben Hall suggested last year there was no rational case for Vladimir Putin to invade Ukraine. Logic, sadly, proved no bar to the Russian leader’s calamitous gamble. If we were hopeful last year that war would be avoided, Tony Barber is pessimistic about the chances of a lasting ceasefire in 2023. And David Sheppard forecasts, on balance, that Europe will experience blackouts as Moscow squeezes natural gas exports. Given mounting concerns, we ask again this year if China will invade Taiwan, adding the possibility of a blockade.

In all, five FT predictions for 2022 missed the mark. We were wrong in calling an end to the “great resignation”; Tesla’s shares fell, thanks in part to Elon Musk’s Twitter escapades; and the Democrats retained the US Senate. We judged incorrect Clive Cookson’s forecast that a more infectious Covid variant than Omicron would emerge, though sub-variants did, and China’s reopening has sparked new concerns.

A number of readers beat the FT, with the three highest scorers tying on 18 correct answers. Congratulations to the winner, after the tiebreaker, Michael Greason of Toronto. Readers are again invited to submit answers to the 20 questions and tiebreaker below, giving their real name and email. At a difficult time for many, we wish everyone a Happy New Year. Neil Buckley

FT readers: submit your predictions for 2023

Will there be a ceasefire in Russia’s war in Ukraine?

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No. Conditions for a lasting ceasefire, let alone a formal peace settlement, are unlikely to be met in 2023. Freezing present positions would satisfy neither Russia nor Ukraine. Vladimir Putin’s Kremlin would not have broken Ukraine’s independence, or even fully control the four regions it “annexed” in September. President Volodymyr Zelenskyy cannot accept a ceasefire leaving Ukraine without the territory lost since Russia’s invasion in February, on top of occupied Donbas and Crimea, seized in 2014. Regaining that territory would require weaponry the west seems unwilling to supply. Russia is trying to regroup and is preparing its people for a long war. A continued, grinding conflict is most likely. Tony Barber

Will there be blackouts in Europe?

Yes. It could happen before April if the weather is cold enough, but next winter is the bigger challenge. Though gas storage sites are now close to full, refilling them in the spring will be tough. In 2022, Russian gas flows were largely intact until June; in 2023 they will be close to zero. Liquefied natural gas will struggle to cover the shortfall. Offsetting the risk is Europe’s backwards shift from gas to coal. France’s nuclear plants should have fewer maintenance issues. But the energy system has been straining for 18 months. The risk of something breaking is increasing. David Sheppard

Will the global temperature temporarily reach the 1.5C warming threshold?

No, but it might as soon as 2024. The planet has already warmed by about 1.1C, comparing average temperatures in 2011-20 with the late 1800s, and by at least 1.2C in recent individual years. With emissions at record levels, scientists put 50:50 odds on temporarily hitting 1.5C in at least one year in 2022-26. With cooling La Nina weather patterns expected to last into early 2023, forecasters think the whole-year temperature will average 1.2C, but this could change in coming years. One year of 1.5C would not mean the Paris Agreement goal had been breached but would take the world much closer. Pilita Clark

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Will the Fed start to cut interest rates?

No. The market expects the Federal Funds rate to peak at 4.9 per cent in the first half of 2023 and then fall to 4.7 per cent in September and 4.4 per cent in December. But the great majority of members of the Open Market Committee believe the rate will end 2023 at 5 per cent, or more. This latter forecast will prove correct. As Fed chair Jay Powell warned in November, “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.” The Fed does not wish to repeat its mistake of complacency. Martin Wolf

Will Rishi Sunak still be UK prime minister by the year-end?

Yes, though looking ever more beleaguered. The prime minister will want to keep going well into 2024 before calling an election but will be threatened by ideologues on the right and by wayward backbenchers. His ruthless Conservative party has ditched four prime ministers since the 2016 Brexit vote — two in the past year. Sunak is a steadier character than Boris Johnson or Liz Truss but his troops, staring likely election defeat in the face, may become even more erratic and politically self-harming. They could hole his leadership below the waterline even if they don’t mean to. Miranda Green

Will the ECB use its new backstop to contain the bond spreads of Italy or others?

No. After president Christine Lagarde’s recent hawkishness, markets now expect the ECB’s end point for rate rises to be higher than expected. Higher rates, a recession and quantitative tightening will add pressure to peripheral bond yields. Yet the criteria for triggering the specially created Transmission Protection Instrument remain tricky and subjective, and the ECB may use existing bond programmes or curb QT first to arrest any blowout in spreads. The Italian government led by the hard-right Giorgia Meloni has also, so far, been more fiscally sound than anticipated. That can change quickly, of course. Tej Parikh

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Will Joe Biden stand for president again?

Yes. There is no getting around the president’s age; Biden will be 81 by the 2024 election, and 82 when the 2025 inauguration happens. But don’t rule out a run just yet. After a bumper year of legislation and a better than expected Democratic performance in the midterms, Biden is probably still the Democrats’ best shot at holding on to the White House; vice-president Kamala Harris has struggled to build a profile. That doesn’t mean other Democrats aren’t exploring the possibility of a 2024 run all the same. Courtney Weaver

Will Donald Trump be indicted?

Yes. There are at least four areas of potential investigative jeopardy for the former president: Trump’s attempt to reverse the 2020 election, his retention of classified documents at Mar-a-Lago, his pressure on Georgia officials to find “missing votes” and the fraudulent management of the Trump Organisation. The first two are in the hands of Jack Smith, the special counsel appointed in November, who has subpoenaed officials in seven states. Based on what is already in the public domain, prosecutors in at least one of these investigations are likely to consider there is sufficient evidence for an indictment — which Trump will no doubt deny and contest to trial. Edward Luce

Can China restore economic growth to more than 5 per cent?

Yes. China is facing a bleak ending to 2022; the opening from its “zero-Covid” policy will sadly claim many more lives yet and is overwhelming hospitals, as the pandemic did elsewhere in 2020-21. But a lot can and will change over the course of the year. Once China learns to “live with Covid”, economic activity should bounce back strongly. Consumer spending will be energised by a pandemic-fuelled glut in savings and Beijing will launch a stimulus package focused on infrastructure. James Kynge

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Will Beijing invade or blockade Taiwan?

No. Xi Jinping may one day decide to attack or blockade Taiwan — but probably not in 2023. An invasion would be a colossal gamble. If it went wrong, Xi could start a war with the US, lose power and permanently damage China’s prospects. A blockade is much more likely: it would put huge pressure on Taiwan to fold, and would dare the US to fire the first shot. But even that would entail huge risks. Xi is unlikely to roll the dice unless convinced Taiwan is permanently slipping from his grasp. Taiwan’s 2024 presidential election may be the next crisis point. Gideon Rachman

Will the Erdoğan era come to an end in Turkey’s June elections?

No. Recep Tayyip Erdoğan will unleash a barrage of methods, fair and foul, to hang on to power despite his dwindling popularity. Extending his rule into a third decade will have dire consequences for Turkey’s already troubled economy, worsen a fall in living standards and place further limits on personal freedoms. The wild card is whether a jail sentence and political ban handed down this month to Erdoğan’s most plausible rival, Istanbul mayor Ekrem İmamoğlu, could create an unstoppable backlash and boost the opposition. Laura Pitel

Can Japan’s yield curve control survive?

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Yes. The negative interest rate may go, however, along with more changes like the recent widening of the trading band for ten-year bond yields. From April, there will be a new governor at the Bank of Japan. All the likely candidates, such as Hiroshi Nakaso and Masayoshi Amamiya, are less dovish than Haruhiko Kuroda, the incumbent. The new governor will seek to “normalise” monetary policy, but with the global economy set to struggle, 2023 will be too early to set yields free. Robin Harding

Will the protests in Iran end?

No. The months-long demonstrations by Iranian protesters, many of them women, were triggered by the death of a young woman, Mahsa Amini, in police custody. They have broadened into calls to replace the theocracy with a democratic system. Their scale has ebbed and flowed; if they escalate again the Islamic regime may crack down even harder. But with the economy struggling under western sanctions, the protests have displayed a resilience that underscores the anger and disillusionment of many Iranians. That will ensure that, whatever the authorities do, protests in some form are likely to continue. Andrew England

Will there be a string of defaults in Africa?

Yes. At a minimum, there will be debt restructurings with haircuts for investors. After big write-offs in Africa 20 years ago, debt has crept up as sovereigns have tapped eurobond markets and borrowed bilaterally. Now, as interest rates rise and economies falter in the aftermath of Covid, debt service payments are becoming unsustainable in some countries. Chad, Ethiopia and Zambia have signed up for the G20 Common Framework for debt-distressed states. Last year, Ghana clinched an IMF bailout as commercial markets closed. It won’t be the last. David Pilling

Will the S&P 500 fall by at least 10 per cent?

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Yes. We asked this question last year, but it bears repeating. After a dreadful 2022 when US stocks sank around a fifth and bonds took a historic hammering, fund managers are asking if the pain is over. Unlikely. A rapid rise in interest rates has already dealt a blow, but central banks are in no hurry to loosen up, and impending recessions have yet to fully bite into corporate earnings expectations or stock valuations. Katie Martin

Will Twitter survive?

Yes. Elon Musk’s $44bn purchase has been predictably chaotic but the platform will stagger on. Users will not leave. Alternatives like Mastodon lack scale. Losses will increase, however. A Musk-friendly CEO will be appointed but advertisers will remain wary and it would take 100mn new $8 subscriptions just to cover debt interest payments. Musk will buy Twitter’s debt to ease financial pressure. His fixation on “free speech” will, though, put him on a collision course with the EU’s new Digital Services Act. A ban is unlikely but hefty fines could be on the horizon. Elaine Moore

Will another major cryptocurrency business fail?

Yes, although it depends a little on the definition of major. The ferocity of the 2022 “crypto winter” means that a lot of the obvious weak links have already collapsed and several frauds have been exposed. But there will be even more casualties next year — and probably some big ones — as chastened venture capital firms and retail traders continue to retreat and deprive the crypto industry of the raw fuel it depends on to grow: punters at the table. Robin Wigglesworth

Will Jamie Dimon announce a successor as CEO of JPMorgan?

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No. The JPMorgan Chase chief executive has said Daniel Pinto, JPM’s president, would take over if he got hit by a bus or left unexpectedly. That doesn’t make Pinto or anyone else his heir. Last year, the board gave Dimon $50mn in options that vest after five more years of service. The dean of Wall Street CEOs has already seen off several potential rivals and the bank plans to open new headquarters in 2025. Barring another serious health scare, there’s no way he wants a target on his back so soon. Brooke Masters

Will any of the big streaming platforms sell or merge?

No, not this year. Consolidation is inevitable in the entertainment industry as streaming becomes dominant. Speculation abounds about combinations: NBCUniversal and Warner Bros Discovery, Disney with Apple, Netflix with a tech giant willing to overpay. Warner will probably be the first domino to fall given its financial troubles. But when AT&T sold Warner in 2022 it was through a structure that restricts dealmaking for a couple of years. It means the big shakeout is more likely in 2024, the year many streamers claim they’ll finally be breaking even. Alex Barker

Will the US women retain the football World Cup?

No. The four-time World Cup-winning US women’s team is the most successful international squad, but the rest are starting to catch up. Since Megan Rapinoe’s US won the 2019 World title, America’s women only eked out a bronze at the Tokyo Olympics. Other nations are gaining, chiefly England. The Lionesses beat long-dominant Germany in the 2022 European championship, boosted by manager Sarina Wiegman who coached her native Netherlands to the 2017 European title and 2019 World Cup runners-up. With star striker Beth Mead, England’s women have a shot at succeeding in 2023 where the men have failed since 1966. Sara Germano

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Tiebreaker: How many heads of state will attend King Charles III’s coronation?


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Does Angie recommend the professional license?

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Peter Blair and Mischa Fisher have it Smart new paper On Professional Licensing that uses data on millions of potential customers generated by Angi’s HomeAdivsor. HomeAdvisor consumers search for services, the platform knows if a service requires a license in a consumer’s case and tries to match the consumer with a suitable local provider, the local provider can then choose to accept or decline the lead. If a lead is accepted, the consumer and provider then negotiate the price and services—since negotiation is mostly handled offline, the main measure of benefit is the likelihood of the lead being accepted.

Many professions are licensed in one state but not in another (as I noted in My talk about professional licensing For a Heritage Foundation, that’s odd if you think there are strong arguments for professional licensing on safety or quality grounds). Thus, the authors compare the acceptable lead rate in states that require a license to complete a task with the rate in states where the same task is unlicensed. To better control for other factors, the authors compare only the acceptable lead rate in bordering counties of different states, as described below. Authors also control fixed effects for status, month, and task.

The bottom line is that the acceptable lead rate is 12.3 percentage points or 21% lower in a county/state that licenses an occupation/task compared to a similar county/state where the job is unlicensed. In other words, if you live in a state that requires a license to complete a task, it will be more difficult to find a contractor than if you live in a nearby state that does not license the task.

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Not surprisingly, the authors find that the acceptance rate decreases not because demand for the licensed service increases but because supply decreases when there are fewer licensed service providers. In the long run, we also know that prices go up in licensed industries (for example, my newspaper with Pizzola Licensing in the funeral services industry).

The authors combine their cross-sectional study with an event study showing that after New Jersey requires a license for pool contractors It is becoming difficult to find a pool contractor in a relative of New Jersey to other countries.

The authors concluded:

The current literature on licensing on digital platforms, which consists of three other papers, carefully measured the effect of licensing on consumer satisfaction and safety by demonstrating that customer subjective reports of service quality and objective platform actions for service provider safety do not increase in the presence of licensed service providers, despite the effect Positive licensing on prices (Hall et al., 2019; Farronato et al., 2020; Deyo, 2022).

… Taken together, our findings and those from three other papers examining licensing in digital labor markets indicate that the traditional view of licensing espoused by Friedman (1962)
About licensing in offline markets, for example, licensing is a restriction of the labor market with limited benefits, and it is also held in digital labor markets (Hall et al., 2019; Farronato et al., 2020; Deyo, 2019).
2022). Our work provides a clear example where labor market regulations developed to control the corresponding economy work against the efficiency gains that technological innovation promises to realize the digital economy (Goldfarb et al., 2015).

the post Does Angie recommend the professional license? Debuted marginal revolution.

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Indonesia Eyes $11 Billion in Capital Market Fundraising This Year By Reuters

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© Reuters. FILE PHOTO: A teller counts Indonesian rupiah banknotes at a teller in Jakarta, Indonesia, October 14, 2022. REUTERS/Willi Kurniawan

JAKARTA (Reuters) – Indonesia aims to raise capital market funds of 170 trillion rupiah ($10.92 billion) for this year, including from initial public offerings and debt instruments, far less than the amount sought, the country’s financial watchdog said on Monday. Collected in 2022.

About 260 trillion rupees were raised through the capital market last year, including the initial public offering of big tech company PT GoTo Gojek Tokopedia, which raised $1.1 billion in April.

Inarno Djagadi, head of capital market supervision at the Financial Services Authority, said 84 offers are in the pipeline with an estimated total value of 81.41 trillion rupees ($5.23 billion).

About 54.5 trillion rupees of that will be from 58 potential IPOs.

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Among the companies expected to go public in 2023 are two units of the state energy company Pertamina, Pertamina Geothermal Energy and Pertamina Hulu Energi.

People familiar with the matter told Reuters in December that Pertamina Hollow Energy could raise as much as $2 billion.

State-Owned Enterprises Minister Eric Thuhir said at a separate event on Monday that Palm Oil Palm Growers, a unit of state plantation company PTPN III, may launch an IPO as early as this year.

($1 = 15,570,0000 rupees)

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Resilient Germany overcomes energy crisis

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The author is the German Finance Minister

Once again, German industry and society proved more resilient and adaptable than some people had feared. Horror scenarios of dangerous energy rationing or a massive recession in our economy are often played out. But we’re not even close to that. With a challenging year just behind us, this is good news – not just for Germany, but for Europe as well.

companies and families He reacts quickly to sharp increases in energy prices. They installed more efficient production or heating facilities, and turned to imported substitutes and intermediates. The results are encouraging: German households and businesses have significantly reduced their gas consumption, despite the recent cold weather. From the start of the war in Ukraine until mid-December, industrial gas consumption in Germany (temperature-adjusted) was about 20 percent lower than the average level for the previous three years. even if some companies reduced production, especially in energy-intensive sectors, industrial output as a whole has fallen by only 1 percent since the beginning of 2022. In addition, in survey Released by the Ifo Institute in November, more than a third of German companies saw the possibility of further reducing gas consumption without jeopardizing production.

Rather than imposing excessive laws and regulations, we relied on price signals and the wisdom of market participants to create the right incentives and reduce gas consumption.

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We will take this approach in the coming months, when energy savings will still matter. Our latest relief measures will not distort price signals. To this end, the The Bundestag agreed The brakes on gas and electricity prices are in their last session in 2022. They are designed to operate without any interference with markets or prices. This system will pay a fixed amount for previous years’ depreciation and the current difference for a reference rate – regardless of current depreciation.

Energy price brakes are the main component of the German “protective shield”. Up to 200 billion euros available For measures in the period from 2022 to 2024. Given the size of the German economy, its high dependence in the past on Russian energy imports and the fact that the measures will end in 2024, these are balanced and fast mechanisms. Unlike the tools used in other countries, our new arrangements will not affect the process of price formation driven by supply and demand, or the incentives to save gas. Firms and households will continue to save at full market price when they reduce consumption by a unit of gas or electricity. In this way, price brakes also avoid creating additional demand for gas at the expense of consumers in other European countries. You don’t have to be afraid of distorting the competition or buying gas. In fact, A recent working paper from the International Monetary Fund On mitigating the impact of higher energy prices on households, he openly praises the German energy price brake.

Current developments confirm the effectiveness of a market-based approach – and show that we must also rely on price signals when it comes to reducing CO2 emissions. Last year, households and businesses only had a few weeks to adjust, but we’ve already seen a strong response. The effect of carbon dioxide prices can be stronger, as adjustment is possible over a much longer period and they additionally influence long-term expectations and decisions. Regulatory interventions and support schemes, even if well targeted, cannot compete with market coordination and incentives that support individual decision-making and foster innovation.

Europe and Germany can get through this crisis without collapsing industrial production. We also have the opportunity to efficiently deal with the transition to climate neutrality. Either way, we must trust price signals as well as the ability of individuals and companies to innovate and adapt.

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