2023 banking and capital markets outlook

A new global economic order seems imminent. However, banks globally can chart a path through the current fog of uncertainty to reposition for a brighter future.

The crystal ball for the global economy has become murky. There is an array of possibilities for the global economy in 2023, ranging from a quick return to normalcy to a prolonged global recession/stagflation. No matter when and how the war in Ukraine ends, the ramifications for energy production, global trade, capital flows, cross-border payments, and supply chain finance will be enormous, affecting how and what banks do to collectively support and engage with economic agents globally.

Key messages

• The global economy is in a fragile and fractious state. While most banks are on sound footing, Russia’s invasion of Ukraine, ongoing supply chain and energy shocks, persistent inflation, and tightening monetary policy will be felt unevenly across the industry. 
• Meanwhile, escalation of geopolitical risks, deglobalization, and fracturing payments systems are pushing the world toward a new economic order. 
• These forces will likely have implications for global money flows: how, where and when capital and liquidity are demanded; and the ways every actor in the financial system interacts with one another.
• To navigate through these uncharted waters, banks should reassess traditional product, service, and industry boundaries to create new sources of value. Such opportunities may exist in a number of areas, including embedded finance, tokenized assets, financial technology, digital identity, or green finance. Some banks have begun this journey, but many could fall behind. 
• The pandemic tested banking leaders’ conviction, and it is about to be tested again. Nonetheless, banks should not lose sight of their role as financial intermediaries in the new global economic order.