WORLD ECONOMIC AND TRADING SITUATION

 Trade Policy and Strategy Framework emerges in the context of broad national development
strategy.
 Need to address key structural challenges in the domestic economy.
 Dynamic changes in the regional and global economic context.
 Structural challenges: widespread poverty; severe inequalities; high levels of unemployment;
and stunted growth.
 Production and employment patterns - capital intensive and skills-bias.
 Our export profile - highly resource-intensive and commodity-based.
 The previous growth path placed emphasis on capital goods in its industrial policy.
 https://www.youtube.com/watch?v=3klVslrk9QU
WORLD ECONOMIC OUTLOOK
 1.DEVELOPED MARKET IN RECESSION
 Among developed economies, the U.S. is likely to grow most robustly in 2023. Consumer confidence
has fallen significantly over the course of 2022 as inflation has outstripped wage growth, eating into
living standards, but consumption has remained robust, with retail sales surprising on the upside in
October and likely remaining strong in the shopping season through the end of the year.
 According to the Purchasing Manager Index (PMI) surveys, manufacturing dipped into contractionary
territory in November for the first time since June 2020 while services continue to expand robustly.
 Inflation has remained stubbornly high, prompting the Federal Reserve to hike interest rates from zero
in March 2022 to above 4% by the end of the year.
 This has had a clear impact on the real estate sector, with existing home sales slowing significantly, and
there are nascent signs that the labor market has begun to loosen, with job openings coming down
marginally.
 Peak inflation likely hit in September, with both headline Consumer Price Index (CPI) and core CPI
abating in October and the New York Fed’s Underlying Inflation Gauge indicating an inflection point for
inflation earlier in 2022.
 Germany and Italy are already seeing output fall and we forecast the eurozone to be in recession in
early 2023. The UK economy has already reported falling output in late 2022, likely the beginning of a
protracted recession.
 https://www.youtube.com/watch?v=pqCT5OeVzR0
2.EMERGING MARKET BUOYING GLOBAL GROWTH
 While developed markets will enter recession in 2023, we expect emerging markets to continue to
grow, buoying lackluster overall global growth of around 2%.
 After growth of around 3% in 2022, we expect China to accelerate moderately to roughly 5% growth in
2023.
 India is expected to grow the fastest among emerging markets in 2023, though we expect growth to
slow moderately from nearly 7% in 2022 to around 6% in 2023.
 India’s economic model is based on the services sector outsourcing from developed markets,
digitalization and structurally rising domestic demand.
 While India already serves as an outsourcing center for business services, we expect manufacturing to
increasingly be outsourced to India as a result of government tax incentives.
 India is also likely to benefit from cheap oil imported from Russia in 2023, as we expect India to
continue to remain outside of Western sanctions on Russia.
 https://www.youtube.com/watch?v=US_XY_xyDIE
3.EMERGING MARKET FACE A SOVEREIGN DEBT CRISES
 A number of EM economies were overleveraged before the pandemic and had to borrow significantly
to finance their pandemic responses.
 With the Fed hiking rates aggressively, borrowing costs have risen across the globe, and the U.S. dollar
has strengthened significantly, making dollar-denominated debt and imports invoiced in dollars more
expensive.(Sri lanka, Pakistan)
 A default and IMF ensued, and as a middle-income country, Sri Lanka was not granted access to the
Common Framework. African nations, which benefited from a global search for yield in the post-20 08
global financial crisis, are particularly vulnerable.
 We expect a number of both low- and middle-income countries to request debt restructurings in 2023,
with the latter denied access to the Common Framework.
 This will make debt restructurings more complex, China is the world’s largest bilateral creditor, and the
terms of China’s lending are broadly unknown.
 https://www.youtube.com/watch?v=dwVx6mVDrZU
 4. VOLATILE FINANCIAL MARKETS AND MARKET
DISLOCATIONS
 Higher interest rates can decrease the value of companies due to an increase in their cost of capital.
The Fed's current rate path is likely to lead to a U.S. recession in the second half of next year, with the
eurozone following in early 2023. The UK is probably already in recession.
 While several companies have raised their prices, passing on some of their increased raw materials,
transportation and labor costs to their customers, many are feeling the operating margin compression.
 Earnings pressure will likely persist into much of 2023, particularly for companies more vulnerable to
rate rises (real estate and REITs) or recession (consumer durables).
 These overall trends disguise the fact that many companies have seen their market value collapse by
half or more. The bleak performance in 2022 reflects markedly changed economic and geopolitical
conditions, with inflation at multi-decade highs across developed markets–exacerbated by Russia’s war
on Ukraine–and a global interest rate hiking cycle.
 The Bank of Japan has been a notable exception, due to different domestic market dynamics.
 Tightening monetary policy and a need for fiscal expansion to address the cost-of-living crisis and
higher energy costs across the developed world (particularly in Europe) are likely to cause swift market
dislocations in 2023.
 5. DEVELOPING GLOBAL TRADE TENSIONS
 The West, and in particular the United States, has a very complicated economic and national security
relationship with China after years of trade tensions, and now the war in Ukraine.
 Back in 2015, Premier Li Keqiang outlined China’s plan to dominate in high tech sectors–such as artificial
intelligence and machine learning–in the “Made in China 2025” strategy.
 Right now, there is a cold war over future technologies, with very real economic casualties on both sides
of China and USA supporting Taiwan . In China, the technology and military complexes have been
impaired by new U.S. export restrictions.
 In the U.S., semiconductor and semiconductor adjacent companies have been stung by the loss of
significant export revenues. One bright spot: the degree of economic inter-dependence between the
West and China is so comprehensive that it may serve to buffer any major escalations.
 Additional trade tensions are brewing between the U.S. and the EU, with the latter complaining of
provisions in the Inflation Reduction Act that will provide subsidies for American-made electric vehicles
(EVs).
 We expect the EU will respond with a series of its own subsidies, but tariffs and sanctions cannot be
ruled out.
 6. RUSSIA’S WAR ON UKRAINE PERSISTS
• As we look ahead to the potential impact of Russia’s war against Ukraine on 2023, we recommend
thinking about developments in three areas: the war on the ground in Ukraine, the possible escalation
scenarios that we did not see in 2022 but cannot be ruled out for 2023 and the ramifications of the war
for those outside of Russia and Ukraine.
• The rest of the world will also continue to be impacted by the downstream effects of the war. Europe is
likely to face a difficult winter with very high energy prices, although perhaps buffered a bit if warmer
than expected temperatures continue through the winter and, from December 5, by the imposition of a
$60/barrel price cap on Russian oil.
• As European unity in support of Ukraine has been one of the most important facets of the international
response to Russia’s invasion, it will be important to keep an eye on whether that unity is dented by
high energy prices, especially as European leaders are likely to be well aware of the success of populist
parties in recent Swedish and Italian elections.
• In the United States, support for Ukraine is likely to be under less of a threat than if the “red wave” had
materialized and the Republicans had taken control of the Senate,
• https://www.youtube.com/watch?v=oy0Mom-vcW8
7. "OLD" AND "TROPICAL" INFECTIOUS DISEASE OUTBREAKS
 As governments and businesses around the world strive to return to life as it was before the COVID-19
pandemic, they need to be prepared in 2023 for a new “age of pandemics.”
 Multiple forces are conspiring together to increase the frequency with which new diseases emerge and
then spread around the world: deforestation, intensive animal agriculture, urbanization, migration and
travel.

 Climate change is amplifying all of those forces and adding in a new threat—warmer temperatures—
making “tropical” diseases now routine in non-tropical countries.
 For example, the Dengue virus used to be something people only worried about if they lived or traveled
near the equator—now you can be infected by it living in France and Arizona.

 Just as the threat of new epidemics is increasing, so too is the vulnerability of the U.S. and Europe.
Anti-vaccine groups are using the same information tactics as political movements, which may be
leading to the return of previously eliminated diseases like polio to the U.S. and the UK
 https://www.youtube.com/watch?v=v0dB3FscBBE
 8. GROWTH OF ESG REGULATION, TRANSPARENCY AND
SCRUTINY

• The evolving environmental, social and governance (ESG) regulatory landscape and incorporation of ESG
factors into companies’ monitoring and reporting frameworks show no signs of slowing down in 2023.
• Environmental factors, particularly climate, sustainability-related and increasingly biodiversity impact,
will remain top of mind. Investors are demanding greater transparency and consistency when reporting
ESG factors and are increasingly scrutinizing the integrity of underlying data.
• Globally, many governing bodies are preparing to ramp up ESG-related regulation that impacts both
corporations and the asset management industry.
• Many are reinforcing due diligence processes in line with the UN Guiding Principles on Business and
Human Rights (UNGPs) and the Organization for Economic Co-operation and Development’s (OECD)
Guidelines for Multinational Enterprises.
• Recent research also shows an increase in companies incorporating human rights abuse factors into
compliance programs, rising 11% globally from 24% in 2021 to 35% in 2022.
 9. HEIGHTENED REGULATORY ENVIRONMENT

• Fresh off a very aggressive rulemaking and regulatory agenda executed in 2022, the U.S Securities
Exchange Commission is expected to refocus its priorities to address the realities of the change in
control of the U.S.
• House, potential recessionary stresses on the financial markets, ever increasing concerns over fraud
and the contagion effect of volatility and liquidity in the cryptocurrency market.
• Typically, the prevalence of fraud and other misconduct increases in distressed or volatile markets and
so does the Commission’s efforts to detect and prevent violations that negatively impact investors or
the integrity of financial markets.
• As a result, the enforcement and examination agenda is likely to continue unabated, with significant
resources being devoted to digital assets and cryptocurrencies, investment adviser misconduct,
corporate disclosures, compliance with the marketing rule, disclosures to retail investors, valuation and
board oversight, liquidity risk management, fees and expenses, undisclosed conflicts and the use of text
and chat messages for business purposes on unarchived platforms.
 10. INCREASED CYBER AND SOCIAL MEDIA RISKS
• There should be no question that cyber-related threats will continue to evolve and remain a constant
danger to every public and private sector organization. The speed and sophistication of cyberattacks in
general should be expected to continue accelerating.
• In particular, we’re seeing ransomware attacks evolve. Previously, attackers simply encrypted data, now
they often steal data before encryption, which allows them to threaten to publish the data, known as
double extortion.
• In some cases, we are seeing them destroy data to limit the victim’s options for restoration or possible
decryption without collaborating with the threat actor, which gives the criminals further leverage to
encourage the ransom payment.
• We have also seen a reduction in the time between the discovery of a new zero-day vulnerability and
the wide exploitation of the vulnerability by the criminal community.
• Sharing risk intelligence at pace with the speed and velocity of social media will help corporations
mitigate risks and navigate social media uncertainty, which is likely to continue into and throughout
2023.