Nearly everyone expected a global recession in 2023 as central bankers battled high inflation. They were wrong. Global GDP probably grew by 3%. Labor markets have endured. Inflation is on its way down. The stock markets are up 20%.
But behind this overall performance lies great variation. The economist collected data on five economic and financial indicators – inflation, ‘inflation breadth’, GDP, jobs and stock market performance – for 35 mostly wealthy countries. We ranked them based on how well they did on these metrics, creating an overall score for each. The table below shows the rankings and some surprising results.
Topping the charts for the second year in a row Greece– a remarkable result for an economy that until recently was synonymous with mismanagement. Aside from South Korea, many of the other notable artists are in America. The United States comes in third place. Canada and Chile are not far behind. Meanwhile, many of the sloths are in Northern Europe, including Britain, Germany, Sweden and, trailing behind, Finland.
Tackling rising prices has been the big challenge in 2023. Our first measure looks at “core” inflation, which excludes volatile components such as energy and food and is therefore a good indicator of underlying inflationary pressures. Japan and South Korea have kept prices under control. In Switzerland, core prices rose by only 1.3% year-on-year. Elsewhere in Europe, however, many countries are still under severe pressure. In Hungary, core inflation is around 11% annually. Finland is also having a hard time.
In most countries, inflation is becoming less and less entrenched – as measured by the ‘inflation breadth’, which calculates the share of items in the consumer price basket where prices are rising by more than 2% annually. Central banks in countries like Chile and South Korea aggressively raised interest rates in 2022, ahead of many others in the rich world, and now appear to be reaping the rewards. In South Korea, inflation has fallen from 73% to 60%. Central bankers in America and Canada, where inflation has fallen even more sharply, can also claim some credit.
Our next two measures – employment growth and GDP – indicate the extent to which economies deliver results for ordinary people. It didn’t do spectacularly well anywhere in 2023. But only a small minority of countries saw GDP decline. Ireland performed the worst, with a decline of 4.1% (take this with a grain of salt: there are). big problems with the measurement of Irish GDP). Britain And Germany also performed poorly. Germany is struggling with the consequences of a shock in energy prices and increasing competition from imported Chinese cars. Britain is still dealing with the consequences of Brexit.
America performed well on both GDP and employment. It has benefited from record high energy production and the effects of a generous fiscal stimulus implemented in 2020 and 2021. The world’s largest economy may have attracted other countries. Employment in Canada has increased significantly. Despite the war with Hamas, Israel, which considers America its largest trading partner, ranks fourth in the overall rankings.
You might think that the US stock market, filled with companies poised to benefit from the artificial intelligence revolution, would have done well. Adjusted for inflation, the country is even performing mediocrely. The Australian stock market, filled with commodity companies that saw a pullback from high prices in 2022, underperformed. Stock prices in Finland have fallen. Japanese companies, on the other hand, are experiencing something of a renaissance. The country’s stock market is one of the best performing stocks this year, with a real increase of almost 20%.
But for glorious stock returns, look thousands of miles west to Greece. There, the fair value of the stock market has risen by more than 40%. Investors have been taking a fresh look at Greek companies as the government implements a series of market-oriented reforms. Although the country is still a lot poorer than before the great crisis in early 2010, the IMF, once Greece’s enemy, praised in a recent statement “the digital transformation of the economy” and “increasing competition in the market”. While underperforming Finns can console themselves this Christmas by drowning their sorrows in their underwear (or getting pants drunkas it is known locally), the rest of the world should raise a glass of ouzo to this most unlikely of champions.
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