The worst of the global economic storm that’s been brewing will likely hit next year, according to Eurasia Group founder Ian Bremmer.
Years of economic disruption caused by the COVID-19 pandemic, the continuation of the Russia-Ukraine war, and an energy supply crisis in Europe have caused inflation rates to skyrocket around the world.
But the challenges will likely continue to trend in the wrong direction in the coming months, Bremmer warned in an interview with The West Block‘s Mercedes Stephenson.
“I think that 2023 is probably going to be the worst of it,” he said, adding that it will be “very easily more challenging than what we’ve seen over the past months.”
Bremmer’s comment comes just two weeks after the International Monetary Fund cut its global growth forecast for 2023, cautioning that the three largest economies — the United States, China, and Europe — will “continue to stall” and cause 2023 to “feel like a recession.”
In Canada, inflation cooled slightly in September but still sits at 6.9 per cent — and food prices soared to a 41-year-high with an 11.4 per cent increase, according to Statistics Canada.
These economic hardships are set to get worse, not better, in the months ahead, the global political risk researcher warned.
For example, the energy crisis in Europe — the result of Russia cutting off its gas pipelines to the region amid its conflict with Ukraine — is causing “very expensive” prices, but the pain has been mitigated by the region’s gas storage.
“The governments can make people whole. They can provide subsidies for people that don’t have the means,” Bremmer said.
“But they’re not going to run out of energy this year.”
However, come 2023, “that won’t be the case,” Bremmer warned.
“Next winter is going to be harder,” he said.
More disruption is likely in the months ahead, Bremmer added, now that a willingness has been shown to interfere with the pipelines that supply energy to Europe. The Nord Stream pipelines were blasted open in what Swedish authorities suggested was an act of sabotage earlier this month, causing a major gas leak into the Baltic sea.
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While Western leaders have stopped short of pointing the finger directly at any country, Fatih Birol, the head of the International Energy Agency, said it was “very obvious” who was behind the blast.
“Irrespective of who did it, it clearly shows that the gloves are off for that kind of behavior going forward,” Bremmer said.
The global political risk analyst isn’t alone in his grim forecast for next year. Former Bank of Canada governor Mark Carney told a Senate committee on Thursday that Canada — and the world — is likely headed for a recession.
“It’s a bit like air travel these days. We know where we’re headed but we don’t know when we’ll get there,” Carney told the committee.
Trudeau must pivot or pay political price: Bremmer
With the global economy set to sink deeper before it comes up for air, Bremmer pointed out that otherwise environmentally-conscious politicians are having to walk back their positions around the world.
“You have the Green Party in Germany that is promoting (the) import of fracked natural gas from the United States,” he said.
“I promise you, I did not have that on my bingo card nine months ago.”
He said countries like Canada will have to accept “an awful lot of natural gas and oil to continue to provide power for people around the world, especially poor people around the world that have no other way to continue to provide for themselves.”
“That’s a reality, and Canada is a part of that reality,” he said.
If Prime Minister Justin Trudeau doesn’t accept this reality, Bremmer warned, “there’s going to be a price to be paid politically.”
“I suspect Justin recognizes that,” he added.
Worsening inflation and affordability, meanwhile, is contributing to anti-establishment sentiment and growing political disfunction, according to Bremmer.
“We see right now these whipsaw elections across South America where, it’s not the left or the right, it’s just whoever isn’t in power, you embrace. Anyone that opposes the existing establishment you embrace,” he said.
“We saw it with the convoys in Ottawa, the shutdown of the (Ambassador Bridge) … I mean, these are unprecedented and deeply problematic things for democracies.”
This division will likely grow as the global economy continues to tank into next year, Bremmer added.
“This level of inequality of opportunity and hardship is causing incredible polarization,” he warned.
“And that’s going to get worse, not better, as we go through these economic challenges in 2023.”
— With files from Reuters, Global News’ Craig Lord