The inflation shock of 2022-2023 results from both supply disruption (COVID persistent disruption, Ukraine war crippling energy/food markets) and demand pressure (particularly US fiscal stimulus exceeding available supply by 2.5 percentage points of inflation, vs 0.5% in UK), meaning disinflation will be hard, markets will remain volatile, and central banks must maintain restrictive policy for longer than desired to avoid repeating 1970s stagflation mistakes.

Emerging market commodity-importing countries face the highest recession and debt crisis risk in 2023 because they have higher debt levels, are subject to sudden capital flow stops, have exhausted monetary and fiscal policy capacity after the pandemic, and face populations frustrated and demanding unmet needs while lacking the policy tools to respond.

Recession will reverse prior wage gains and income distribution improvements seen in pre-pandemic developed economies, increase political discontent both between low-income consumers and affluent populations and between developed and developing nations, and make central bank tightening decisions far more politically divisive as policymakers face blame for raising unemployment and lowering real wages.