High inflation and high interest rates affect groups in different ways.
That MasterCard Economics Institute said in his Economic Outlook 2023which was released on Thursday (December 8) that these and other factors in the global economy are having a variety of impacts on countries, businesses and consumers.
For example, higher interest rates will cause real estate markets to move at different speeds in different countries. In Australia, Canada and some European countries, high mortgage rates are likely to weigh on discretionary consumer spending. Most Latin American countries, on the other hand, will be less affected.
High inflation will also have different effects in 2023, the study found. In most parts of the world, consumers are switching brands and stores in response to higher food and energy costs. However, in Australia, Canada and the United States, consumers continue to spend because they are more willing to draw on their savings and because their spending has been supported by a tightened labor market and stronger credit spending.
With prices high regardless of country, higher-income households remain strong on discretionary spending, while lower-income households tend to decline. While low-income households’ trend to scale back “nice-to-have” items in favor of everyday necessities may ease as inflation eases in 2023, the gap in spending habits exacerbated during the pandemic will remain, das said Mastercard Economics Institute.
Companies are also affected in different ways by these global economic factors. The study found that while larger companies can absorb these shocks by using their cash buffers, smaller companies that rely on bank financing may struggle.
“An in-store and online presence has helped companies connect with customers they might otherwise not be able to reach, expand brand awareness, diversify and expand product offerings and sales, and maintain more flexible and targeted pricing structures,” the Mastercard Economic Institute said in the report.