This time last year, Chairman Jerome Powell assured that the Federal Reserve would persist with rate hikes until achieving economic stability. In the face of elevated inflation and a lopsided labor market, a record number of CEOs predicted a looming U.S. recession, compounded by bank stress, debt ceiling debates, government shutdown threats, and global geopolitical tensions. Fast forward to today, inflation has more than halved while maintaining resilience in economic growth. As a result, economists are predicting a soft landing scenario, while the Federal Reserve envisions three rate cuts in the upcoming year.
In Europe, the Central Bank also opted to tighten its monetary policy. Notably, inflation, which stood at a staggering 8.6% in January 2023, has been reined in to 2.9% by December 2023. This shift signifies the concerted efforts to balance economic stability while addressing inflationary pressures. In contrast, Japan opted to maintain an ultra-loose policy throughout 2023. BOJ Governor Kazuo Ueda’s cautious approach reflects a deliberate stance, balancing the need for economic stimulus against the potential challenges of negative interest rates.
On another note, looking at the local economy, Lebanese hardship continued in 2023. Since the onset of the crisis, GDP has fallen by about 40% , the parallel exchange rate has seen a 98% devaluation, unemployment and poverty have increased to historic levels and the central bank’s foreign exchange reserves have diminished by two-thirds. Additionally, inflation has soared to 192.26% in December 2023 as the country has become dollarized and cash cased. Unfortunately, a significant number of Lebanese citizens have migrated in search of a better future overseas. Finally, public sector institutions are failing, leading to substantial reductions in basic services like electricity and water for the population. It is unfortunate that since the departure of Michel Aoun from the presidential palace on October 31, 2022, Lebanon has been facing a prolonged presidential vacuum with no solution in sight.
In the dynamic landscape of the global economy in 2023, the bond market has undergone notable shifts across various regions, reflecting the intricacies of each jurisdiction’s economic policies and challenges. This review aims to dissect the repercussions of these monetary policy shifts and regional economic developments on the global Eurobond market in 2023. By unraveling the interplay between central bank decisions, economic performances, and investor responses across the United States, Europe, United Kingdom, Japan, and emerging markets, we seek to provide a comprehensive understanding of the forces that shaped the Eurobond market on the international stage throughout the past year.
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Overview of Lebanon’s Eurobonds Market in 2023