At the beginning of this year, many economists predicted a mild recession in the United States, a deeper one in Europe, and a robust rebound in China. What a difference a year makes. There was no recession in the United States, Europe managed the situation better than anticipated, and China is struggling to regain its footing. Forecasting is a tricky business, and 2023 gave economists plenty of wild cards to contend with, from banking failures to the rapid growth in artificial intelligence (AI). In an effort to make sense of a complicated year, our GeoEconomics Center experts take you inside the numbers that mattered—including many you may have missed—in 2023.

—Sophia Busch is an assistant director at the Atlantic Council’s GeoEconomics Center.

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Those numbers come from the new analysis produced by the GeoEconomics Center and Rhodium Group in our Sanctioning China in a Taiwan Crisis report, published in June. The findings, the first time numbers had been modeled on these scenarios, turned a lot of heads in Washington, Brussels, Berlin, Paris, London, Tokyo, and even Beijing. The three trillion dollar amount (roughly the size of the United Kingdom’s entire gross domestic product (GDP) in 2022) is what would be at immediate risk of disruption in trade and financial flows if China’s big four banks were sanctioned. Importantly, that number didn’t include any targeting of China’s foreign reserves. Equally important, but more overlooked, was the thirty-three billion dollar amount. That number comes from an estimate of the costs of the Group of Seven (G7) putting export controls on one specific sector of the Chinese economy, in this case the aerospace industry. Thirty-three billion dollars is the potential cost of China’s retaliatory measures on the US and European aerospace sectors. Sanctioning China is one of the most complex financial and geopolitical questions that exists. Our work this year helped shed some light on what it might mean in practice, and we plan to do more on this front in 2024.

—Josh Lipsky is the senior director of the GeoEconomics Center.

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If this forecasted issuance level is reached by the end of the 2023 fiscal year, climate-related fixed income will reverse 2022’s decline and will constitute between 14 percent and 16 percent of total bond issuance. Sovereigns, led by European nations, have nearly tripled their issuance activity since 2019, while private sector issuance during the same period has tumbled due to regulatory risks. The funds fall short of estimated investment needs to meet climate-related policy targets. Nonetheless, the bond issuance data shows that policymakers are stepping up their engagement to mobilize funding for a broad range of emissions reduction and renewable energy priorities.

—Barbara C. Matthews is a nonresident senior fellow at the GeoEconomics Center.

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Saudi Pro League clubs’ spending was second only to the United Kingdom’s Premier League ($1.39 billion), beating out spending numbers of the other four big European football leagues (in Italy, France, Spain, and Germany). Importantly, Saudi clubs poached some of Europe’s top talents, including Cristiano Ronaldo, Neymar, and Karim Benzema, boosting the Saudi League’s status as an increasingly competitive league on a global level.

As part of Saudi Vision 2030, the kingdom is looking to diversify its economy away from oil, while making sports a noteworthy contributor to its GDP. Crown Prince Mohammed Bin Salman has publicly stated that Saudi Arabia already has achieved 1 percent GDP growth from sports alone, and aims for another 1.5 percent on top of that. Thanks to the country’s nearly endless supply of oil money parked in its Public Investment Fund (worth over $776 billion), the Saudis have increased their presence in sports, taking over English club Newcastle United, launching the LIV golf tour, holding its first ATP tennis tournament, and hosting the 2034 FIFA World Cup. 

While Saudi Arabia may have its own motivations for investing in sports, it’s not the only country in the region to have poured money into sports. Last year, Qatar hosted the most expensive FIFA World Cup ever, amounting to $220 billion, nearly fifteen times more than the second-most expensive World Cup (hosted in Brazil in 2014). And, the United Arab Emirates (UAE) owns a majority stake in English club Manchester City, the current champions of the Premier League. With European countries increasing trade with the Middle East following Russia’s invasion of Ukraine, look for deeper collaborations beyond just oil in 2024, potentially turning the Middle East into a magnet for top athletes, international media, and sponsors.

—Harry Yeung is a young global professional at the GeoEconomics Center. 

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This year, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded to Claudia Goldin (no known relation, but pride in the name nonetheless), who became the first (and, so far, the only) woman to win the Nobel Prize for Economics solo. Somewhat ironically, she received the award for her lifelong study of women in the workforce. She is the third woman overall to receive the economics Nobel, which has been awarded fifty-five times to ninety male laureates between 1969 and 2023, as well as Esther Duflo (2019) and Elinor Ostrom (2009) who were bestowed the award alongside their male colleagues. So that’s three out of ninety-three, just 3 percent. These numbers reflect the sorry state of women’s recognition in economics, a field where representation is challenged from the start—outnumbered two-to-one in the number of economics PhDs in the United States (and even larger disparity elsewhere) and comprising under 10 percent of authors of economic literature. Leading academic and professional society American Economics Association has stepped up efforts to close the gaps through its Committee on the Status of Women in the Economics Profession, and international civil society mentoring efforts such as Women in Economics are expanding, but clearly more efforts are warranted.

—Nicole Goldin is a nonresident senior fellow at the GeoEconomics Center and global head of inclusive economic growth at Abt Associates, a consulting and research firm.

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In the 2022 edition of this report, I highlighted the scale of the Russian sanctions program, but noted that enforcement would be a key component of any effective sanctions program. While formal enforcement actions related to violations of Russia sanctions were limited in 2023, it’s important to note that this hasn’t slowed pressure from US government officials, along with their allies. Over the course of 2023, US government officials have made at least ten publicly disclosed visits to countries such as Ghana, India, Kazakhstan, Kyrgyzstan, Kenya, Nigeria, South Africa, Switzerland, Turkey and the UAE to reinforce the need to comply with US and Western sanctions targeting Russia in response to its full-scale invasion of Ukraine. These visits are part of an attempt to give fair warning to these nations of the potential consequences of noncompliance with the sanctions. This was a strategy used since the birth of the Terrorism and Financial Intelligence group within the US Treasury Department and was proven effective as the United States increased sanctions on Iran under presidents George W. Bush and Barack Obama through similar visits around the world.

—Daniel Tannebaum is a nonresident senior fellow in the GeoEconomic Center’s Economic Statecraft Initiative and a partner at Oliver Wyman, where he leads the firm’s Global Anti-Financial Crime Practice.

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This is not a judgment: some will cheer and some will lament this zero. The current administration was clear from the beginning that its bilateral trade policy would not be business as usual. This is partly because some believe that the outcome of traditional comprehensive FTAs—the mutual elimination of unnecessary bilateral trade barriers, including tariffs—benefits some US constituencies, like businesses, at the expense of others, like workers: even if FTAs grow the economic pie, they believe, the slices are not equitably distributed.

But it is also true that there is nothing inherent in comprehensive FTAs that prevent them from growing jobs, protecting workers, combating climate change, and building resilient supply chains, among other important US priorities. To the contrary, the incentives and leverage built into comprehensive FTAs may make them the best vehicle for pursuing those goals, if designed appropriately. FTAs also strengthen ties with like-minded allies and promote our shared democratic principles of regulatory transparency and rule of law among a global community that does not uniformly share them.

Many of our trading partners agree, and their “By the numbers” headline would be significantly higher than zero.

It is valuable and healthy to pause and reflect carefully on whether previous comprehensive FTAs have been meeting today’s challenges, or whether they should be adjusted. But there will soon come a time to act on those reflections and to move forward on a new generation of comprehensive FTAs that are fit for purpose, to move past zero. Maybe next year.

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center.

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These figures, recorded in the first ten months of the year, made 2023 the hottest in recorded history. Against this backdrop, the United Nations climate change summit known as COP28 achieved a historic breakthrough last week: the first-ever commitment to a transition away from fossil fuels, which is significant even though there is no certainty or clear path on how countries will decide to move away from fossil fuels.  

Clearly the world’s largest polluters should act now: China, the United States, India, the European Union, and Russia are responsible for more than two-thirds of global emissions. Meanwhile, low-income and lower-middle-income economies (home to about half of the world’s eight billion people) contribute only 17 percent to global emissions. Specifically, the world’s two largest economies have a critical role to play here. While China is home to about 30 percent of the world’s installed renewable capacity, including hydroelectric, more than half of China’s energy demand is sourced through coal. But historical emissions also matter. While the United States’ energy intensity—energy used per unit of GDP—has been declining steadily over the past three decades, the country has been responsible for 20 percent of the world’s total emissions since 1850, far and away the most in the world. Moreover, US emissions per capita are about twice that of China. The United States and China must lead the world out of its growing climate crisis together.

—Amin Mohseni-Cheraghlou is a macroeconomist with the GeoEconomics Center and leads the Atlantic Council’s Bretton Woods 2.0 Project. He is also a senior lecturer of economics at American University in Washington DC. Follow him on X at @AMohseniC.

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This is the sum of assets of the three US banks that failed in 2023: Signature Bank ($110 billion), Silicon Valley Bank (SVB: $209 billion), and First Republic Bank ($229 billion). SVB is the best example of these mid-sized banks, defined as having assets between $50 billion and $250 billion, which suffered from what is now known as a ‘‘bank run in a snapshot.’’ Indeed, SVB failed in a couple of days, as most of its liabilities were very short-term deposits by a limited number of Silicon Valley firms that could transfer money via a click.

This happened when depositors realized SVB’s assets were mainly invested in long-term bonds with reduced market value since interest rates had risen. Rumors via social media accelerated the withdrawals (about $42 billion during the last day). This type of mid-sized bank was mismanaged but benefited from regulation exemptions in the United States and insufficient supervision in California.

Whereas the sum of these three bank failures is sizable by comparison to those of 2008-09 (see chart below), urgent actions by the US Treasury and the Federal Deposit Insurance Company halted the contagion in the United States. Except for Credit Suisse, which was absorbed by UBS with the support of the Swiss authorities as it was perceived as ‘‘too big to fail,’’ banks in the rest of the world were not really affected.

—Marc-Olivier Strauss-Kahn is a nonresident senior fellow at the GeoEconomics Center and a former director general and chief economist for the French central bank.

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This year, generative artificial intelligence (AI) captured the public’s imagination with its ability to generate photorealistic images, videos, audio, and text. Many believe that models such as GPT-4, PaLM 2, Llama 2,  and Mistral will revolutionize how humans interact with computers for government services, education, and enterprise settings, to name a few. However, the amazing capabilities of generative models come at a cost. Today, the leading models are growing quickly in size (as measured by their number of parameters, the values that control LLMs’ behavior). This matters because larger models are more expensive to train and more expensive to use once trained. For example, the Llama 2 (70B) model has seventy billion parameters and required a staggering 1.7 million graphics processing unit (GPU) hours, or the equivalent of almost two hundred years, to train. (This was sped up in practice by using these resources in parallel.) The geoeconomic implications of these trends are likely to become more severe in the coming years. To train or host these models, organizations will need access to data centers with many GPUs. Moreover, due to data use and data locality restrictions in many regions, such data centers may need to be local. However, data centers are distributed inequitably across the world, with the vast majority of data centers located in the United States and Europe. This is likely to lead to a massive disparity in the ability to train, use, and benefit from generative AI. 

—Giulia Fanti is a nonresident senior fellow at the  GeoEconomics Center and an assistant professor of electrical and computer engineering at Carnegie Mellon University.

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North America continues to perform as a commercial powerhouse in trade and in attracting foreign direct investment (FDI). During the first three years of the United States-Mexico-Canada Agreement (USMCA), goods trade among the three countries grew 29.8 percent (not including the services sector), rising to $1.56 trillion by the agreement’s third anniversary in July 2023.

In mid-2023, Mexico also became the United States’s largest source of imports, surpassing China. Mexico is also the United States’ number one trading partner, with Canada in second place and China in third.

The three countries are also attracting impressive amounts of FDI, as nearshoring and reshoring progress. The Organisation for Economic Co-operation and Development reports that the United States was the largest recipient of FDI in the first half of 2023, with Mexico and Canada tied for the third-place slot. Mexico has been attracting a good deal of FDI, but many experts believe it is falling short of its potential for a variety of reasons. Nevertheless, Chinese companies are moving into Mexico to take advantage of North American supply chains and avoid the restraints on US-China trade. Chinese investment in Mexico grew by more than 200 percent in the last two years. While trade growth has been slowing in recent months, we should watch the goods and services figures for the last quarter of 2023 to see if USMCA trade sets a record this year.

—Earl Anthony Wayne is a nonresident senior fellow at the GeoEconomics Center and a former US ambassador to Mexico.

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Across the European Union, debt levels have been declining since the end of the pandemic, while defense spending is on the rise since the Russian invasion of Ukraine. In the context of higher interest rates, European allies face the dilemma of how to increase defense spending and meet their defense spending pledge while limiting debt levels. As Europe wants more economic security, it needs more military means to achieve that end. Also, Europe has to play a more equal military role in the Atlantic Alliance. In 2024 and beyond, Europe’s leadership will face hard choices to ensure that its defense expenditure remains fiscally sustainable.

—Elmar Hellendoorn is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center.

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China’s deep real estate crisis has been built on a bubble in which prospective homeowners and speculators put their money into homes that were just blueprints. Developers took their money before breaking ground in order to finance planned projects. But as the rush for apartments gathered speed, the real estate companies increasingly used the money to finish earlier projects or make other investments. The result is an estimated twenty million unfinished apartments on the books of property companies, including nearly three dozen of the country’s fifty largest developers that have defaulted on loans and other forms of financing. The likely tab to finish the work nationwide: more than five hundred billion dollars. (That’s on top of some seven billion square feet of unsold housing that is sitting empty across the country, equivalent to 7.2 million homes, by one estimate.)

Beijing has committed about 550 billion yuan (seventy-seven billion dollars) to help finish the housing projects. But that is only a down payment on what will be required, and much of that money has not been put to work. Meanwhile, millions of Chinese homebuyers are left with empty dreams.

—Jeremy Mark is a nonresident senior fellow at the GeoEconomics Center and former official at the International Monetary Fund and reporter for the Wall Street Journal.

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The Russian oil price cap has been the most discussed, debated, and dissected sanctions effectiveness issue in recent memory. The “does it work or not?” debate has been the subject of nearly endless commentary in the journalist community and a fair bit of bobbing and weaving by the Biden administration. Ultimately, the price cap mechanism is a proxy variable for the West’s attempts to harm the Russian economy without driving oil prices up by scaring the market off of Russian supply. While crude prices were relatively low, the cap appeared to be holding, but now that prices have risen there are more questions about adherence to the cap and, crucially, whether Russia is profiting from its war of choice. Unsurprisingly, there have been tentative moves by the United States to enforce the price cap, including a handful of sanctions designations of ships and their owners violating the price cap constraints. None seems to have had significant market impact on crude prices and it remains to be seen if there is an increase in price cap compliance—and a corresponding revenue decrease in Moscow as a result. Expect continued enforcement and much additional discussion, debate, and dissection of the sixty-dollar threshold over the months to come. 

—Brian O’Toole is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and global head of sanctions at Wells Fargo, where he oversees sanctions compliance and list-based screening efforts across the enterprise.

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Belgium, Luxembourg, and Estonia implemented their first national-security related foreign investment screening mechanisms, Netherlands and Slovenia integrated new screening mechanisms with pre-existing frameworks, and many others updated the rules to existing screening mechanisms (including Australia, Canada, Denmark, the Slovak Republic, Spain, and the United States), according to data maintained by the Politics and Regulation of Investment Screening Mechanisms dataset. While information on transactions screened are only available on a delayed timeline, in 2022 the United States and the EU reviewed 1,131 cross-border mergers and acquisitions, up from 682 reviews in 2021.

—Sarah Bauerle Danzman is a nonresident senior fellow with the GeoEconomics Center’s Economic Statecraft Initiative and an associate professor of international studies at Indiana University, Bloomington. 

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At its October 2023 plenary meeting, the Financial Action Task Force (FATF)—the global money laundering and terrorist financing watchdog—added Bulgaria to its “Grey List” of jurisdictions under increased monitoring for deficiencies regarding money laundering, terrorist financing, and proliferation financing. This brought the total number of greylisted jurisdictions listed to twenty-three. Three countries also remain on FATF’s “Black List” of jurisdictions due to serious strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. 

Since its inception in 1989, FATF has helped safeguard the international financial system from abuse by terrorist organizations and other illicit actors, but spurring countries that lack the capacity—or willingness—to implement much-needed anti-money laundering and countering the financing of terrorism (AML/CFT) measures has proven challenging. At present, only a limited number of countries have demonstrated a high level of effectiveness on investigating, prosecuting, and sanctioning terrorist financiers, according to the IMF. In fact, in FATF’s own report last year on the state of effectiveness and compliance with its standards, the organization acknowledged that “nearly all countries need to make substantial improvements” on standards implementation. 

Is there scope to further leverage FATF to encourage needed legislative and regulatory reforms related to AML/CFT in countries around the world? In the year ahead, the international community has an opportunity to act when it comes to promoting robust standards to counter illicit finance—and to reevaluate where more work is needed on the part of FATF to help ensure governments have the appropriate tools to prevent, detect, investigate, and prosecute illicit financial activity.

—Lesley Chavkin is a nonresident senior fellow with the Economic Statecraft Initiative of the Atlantic Council’s GeoEconomics Center and served as the US Treasury Department’s financial attaché to Qatar and Kuwait from 2017 to 2020.

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Out of the 324 operating banks in Russia, forty-one have been designated by at least one jurisdiction of the G7 sanctioning coalition. This number was derived by checking sanctions coalition designations against all Russian banks. While 80 percent of Russia’s banking sector assets have been targeted with sanctions, only 12 percent of the total banks were sanctioned. Moreover, only ten banks out of the sanctioned forty-one have been banned from the SWIFT messaging system. 

This explains how Russia is still receiving payments for energy exports, despite heavy financial sanctions and the so-called “nuclear” SWIFT ban. The majority of sanctioned banks can still perform international transactions and settle cross-border payments through SWIFT. 

The purpose of financial sanctions was to deal a heavy blow to the Russian financial system, which could only be achieved by sanctioning all Russian banks. Without a full financial embargo, transactions from major sanctioned banks shifted to smaller unsanctioned banks. Specifically, when major Russian banks such as Sberbank, VTB, and Alfa-Bank were sanctioned and, thus, were no longer able to transact in dollars with Western financial institutions, Russia found alternatives in a wide range of banks that were untouched by sanctions or the SWIFT ban.  

Some Russian banks are not sanctioned on purpose. For example, the European Union has not sanctioned Gazprombank so it can continue to process energy transactions. The same is true for banks facilitating pharmaceutical or food-related transactions.

While certain carve-outs are likely to remain in place for humanitarian purposes, the only way to increase pressure on the Russian financial system and oil revenues is to de-SWIFT all sanctioned banks, track down which banks financial transactions have shifted to, and designate them too. 

—Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

—Maia Nikoladze is the assistant director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

—Yulia Bychkovska is a young global professional at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @_YuliaB_.

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The number of harmful global trade interventions in 2023 (as of December 4) is nearing the record level of 3,110 reached last year, according to data published by the Global Trade Alert.

The number of harmful interventions began to rise markedly from their long-term average around three hundred in the late 2010s, and subsequently shot up during the COVID-19 pandemic. Historically, about half of all 16,288 harmful interventions recorded since Global Trade Alert began its work in 2009 involve trade subsidies. The United States has implemented a total of 2,222 interventions, the most of all countries, and China is the country affected by most interventions, counting 6,018. The sectors most affected by harmful interventions include iron and steel products, other metal products, cereals, and cars and other automotive products.

—Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former International Monetary Fund official with decades-long experience in economic crisis management and financial diplomacy.

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Iron and steel contribute roughly 11 percent, and aluminum roughly 3 percent, to total global CO2 emissions. The United States and European Union are the second- and third-largest import markets for steel, respectively, with the United States also leading global aluminum imports. To address global carbon market excess capacity and carbon intensity of the steel and aluminum industries, the EU and the United States decided in October 2021 to look into integrating trade and climate by linking market access to carbon intensity in the so called “Global Arrangement on Sustainable Steel and Aluminum” (GASSA). If GASSA were to be concluded, it would effectively limit market access for economies that do not comply with certain emission thresholds in their steel and aluminum production, or that exacerbate the global steel and aluminum oversupply. China, Russia, and India would be particularly affected by the deal, given their highly carbon-intensive steel manufacturing practices. But negotiations for the limited trade deal have stalled, despite original plans to conclude the agreement within two years.

Failing to conclude a deal would not only be a missed opportunity to contribute to global decarbonization, it would also forego a more permanent solution to the ongoing issue of US tariffs on EU steel and aluminum, originally brought about by former President Donald Trump’s Section 232 tariffs. For the two years the negotiators had given themselves to conclude GASSA, US tariffs on European steel and aluminum were replaced by a tariff rate quota as an interim solution, set to expire by the end of this year. With the end of the year fast approaching, Brussels extended the truce for another fifteen months, until after the 2024 election.

—Marie Kasperek is a nonresident senior fellow at the Atlantic Council and director of the Institute of International Economic Law at Georgetown University.

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Crypto is currently in a bear market, with a 27 percent decline in developers since the previous year. That being said, there are 66 percent more developers since the previous bear market in 2020.

Long-term growth in the number of crypto developers means continued innovation in permissionless blockchain technology. Developers can build new applications on top of blockchains or even existing decentralized applications. There are already new methods to solve transaction speeds and high transaction costs in cryptocurrencies, including improved ways of validating transactions, creating secondary layers on top of existing blockchains, and performing off-chain processes in a secure and trust-minimized way.

Expect to see further open source innovation across blockchain verticals such as infrastructure, payments, decentralized finance, credit, and privacy that will compete with centralized technology.

—Nikhil Raghuveera is a nonresident senior fellow at the GeoEconomics Center and co-founder of Heimdall Labs.

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As of December 3, the Office of Foreign Assets Control (OFAC) has imposed a total of $1,535,665,641.08 in civil penalties this year in connection with thirteen enforcement actions. These actions involved violations of a broad range of OFAC’s sanctions programs, including those pertaining to Iran, Cuba, Venezuela, Crimea, Syria, Sudan, and North Korea, as well as the Weapons of Mass Destruction Proliferators Sanctions Regulations. Notably, 2023 marks OFAC’s largest settlement ever—a whopping $968,618,825 penalty—with virtual currency exchange Binance. This action was part of coordinated settlements with the Department of Justice, the Financial Crimes Enforcement Network, and the Commodity Futures Trading Commission totaling more than four billion dollars in fines and forfeitures. OFAC’s aggregate penalty amount to date in 2023 already far surpasses that of recent prior years ($42,664,006.65 in 2022; $20,896,739.22 in 2021; and $23,565,657 in 2020) and appears to underscore the agency’s focus on promoting national security objectives through strict enforcement of sanctions laws and regulations. 

The Binance settlement is notable not only for its size, but also as evidence that OFAC holds new technology platforms to the same compliance expectations as traditional business models, despite technical and jurisdictional complexities. The Binance settlement may also indicate increased scrutiny—and possible forthcoming enforcement actions—on virtual currency and cryptocurrency platforms. Regardless, this year’s substantial tally should signal to businesses across industry sectors that without meaningful commitments and attention to sanctions compliance, they too could face historic exposure.

—Annie Froehlich is a nonresident senior fellow at the GeoEconomics Center’s Economic Statecraft Initiative and special counsel at Cooley LLP.

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Of all the global divergences that drew attention in 2023, one received far too little attention. The world is dividing over work-from-home, and the ramifications will be considerable. Full-time employees in Canada worked from home 1.7 days per week in 2023—more than one third of the workweek and more than any other country. The United States was not far behind at 1.4 days per week, twice that of countries in Asia (0.7) and well ahead of Europe (0.8) and Latin America (0.9). This is a massive, slow-moving experiment that will reshape the productivity of the global economy. If work-from-home can be as productive as its proponents claim, then the economies adopting it will better allocate talent and may even be more resilient in the face of climate disasters. If, on the other hand, work-from-home proves ineffective, the economies that have embraced it will be stuck trying to convince workers to go back to the office.

—Walter Frick is an editor and writer at the GeoEconomics Center.

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International Monetary Fund (IMF) data show just how much low-income countries (LICs) have suffered from the COVID-19 pandemic, reinforced by Russia’s war in Ukraine. That loss reflects the output foregone by the LIC economies compared to the pre-COVID growth trajectory; and it is very likely to become permanent. In other words, the pandemic has pushed those countries back much further in their efforts to catch up with other more developed countries—significantly increasing the number of their people living in poverty and pushing many of them into sovereign debt crises. The plight of the LICs has cast a dark shadow over the stability and well-being of the world.

By comparison, the global economy has suffered a 3.4 percent loss from the pandemic, with the United States being the only country to fully recover, and even exceed, its pre-COVID growth trend.

—Hung Tran is a nonresident senior fellow at the GeoEconomics Center and a former IMF official.

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China’s economy badly underperformed its potential in 2023. And what’s worse, Beijing lost credibility by refusing to let the official data show it. Statistics were taken down, and Chinese economists are being coerced into suppressing pessimistic views. That only made things worse. If international investors—which, unlike their Chinese counterparts, have a choice about whether to bring their money into China—cannot trust official data, and they cannot do their own due diligence for fear of running afoul of broad restrictions, they will stop coming. And that is what they did, actually disinvesting for the first time on record in the third quarter of 2023. 

The power of international voices to speak frankly about the illogic of China’s claimed economic performance has never been so important. So it is more than a little troubling that IMF economists sent to China to assess conditions announced on November 7 that—after all their work—they concluded that China would achieve 5.4 percent GDP growth in 2023, pretty much what Beijing pledged all year. It was as though none of the year’s striking economic shortfalls had happened. The IMF pointed to third-quarter consumption to justify its numbers, though independent economists had long figured out that prior-quarter data had been altered to make that quarter look better. 

Those looking to find how much China’s economy actually grew this year struggle to find 2 percent expansion, with property, exports, and local infrastructure finance all flat or negative. The IMF rightly gave Beijing credit over the decades when it was actually reforming, and that endorsement was valuable to China. If its only job today is amplifying Beijing’s story regardless of national income accounting science, its endorsement will no longer play a helpful role.

—Daniel H. Rosen is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and a founding partner of Rhodium Group where he leads the firm’s work on China, India and Asia.

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This year, interest paid by governments increased by 10 percent year-over-year, and is expected to hit a record high. As central banks respond to inflationary pressure, rising interest rates, coupled with slowing growth, have increased the burden of global public debt. In the United States, the Congressional Budget Office has warned that by 2028, interest costs could surpass spending on defense. Among developing economies, spending on interest has grown faster on average than education, investment, and health care.

Rising debt interest payments have drawn serious attention. United Nations Secretary-General António Guterres has called rising interest costs a “systemic failure.” During a high-level convening of central bankers in Jackson Hole, Wyoming, in August, economists Serkan Arslanalp and Barry Eichengreen set out potential steps to bring public debts down. Politicians face an unattractive set of options. An “austere” approach would require running persistent primary budget surpluses. This is unlikely as global growth slows, and as climate, defense, and demographic challenges demand new outlays. An “arithmetic” approach, which would require caps on nominal interest rates to sustain debt-reducing effects of inflation, is similarly unfeasible. 

Developing economies, which confront higher costs of borrowing than their developed counterparts, in particular face growing risks of debt crises. However, even developed economies face the possibility of credit downgrades if their debt trajectories are perceived as unsustainable. Demand for government spending on both guns and butter is not expected to abate. Expect this trend to be followed, with interest.

—Ryan Murphy is a program assistant at the GeoEconomics Center.

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BRICS members have come a long way since “BRIC” was first coined in 2001, when Brazil, Russia, India, and China collectively represented less than 10 percent of world output (and just an eighth of the G7’s). 

The upcoming accession of Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE on January 1, (a sixth invitee, Argentina, reneged after its most recent presidential election) will double the BRICS membership roster. But for all the attention on  expansion, the new members will only modestly increase the grouping’s economic heft—adding around 2.5 percent of global GDP.

The upshot is that new members alone will not be enough to sustain the BRICS group’s economic trajectory. Beyond well-publicized economic challenges in China, the IMF projects growth rates below 2 percent in Brazil, Russia, and South Africa next year. The BRICS are getting bigger. But they need a more solid foundation.

—Phillip Meng is a consultant at the GeoEconomics Center.

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Taylor Swift’s Eras Tour is estimated to have contributed more than four billion dollars in consumer spending in the United States alone, according to Bloomberg economics. Even the Fed took notice. In the Federal Reserve Bank of Philadelphia’s monthly economic review, the Beige Book, it recognized the Eras Tour for boosting hotel revenue in Philadelphia after a slow recovery in tourism in the state. That boost popped up across the country. During Swift’s summer tour, revenue estimates range from $48 million in Cincinnati and Kansas City to $320 million in Los Angeles.

The Swift effect is not limited to the United States. As she takes her tour to Canada, South America, Asia, Australia, and Europe, most concert dates are already sold out. Cities hosting her concerts have already seen economic impacts, with fans spending thousands on tickets, lodging, outfits, and merchandise. In an unusual move last month, LATAM, South America’s largest airline, announced it would not charge customers change fees or fare differences for rebooking their return flights from Buenos Aires after Swift delayed her show for two days due to weather. This gesture by LATAM may well have injected tens of millions of dollars into the Argentinian economy if enough fans decided to extend their stays in Buenos Aires as a result.

Swift’s blockbuster year further underscored the pivotal role of entertainment in the global economy, and earned her the title of TIME’s Person of the Year 2023.

— Alisha Chhangani is a program assistant at the GeoEconomics Center.

Image: US Treasury Secretary Janet Yellen, left, listens as Chinese Vice Premier He Lifeng, right, speaks during a meeting at the Diaoyutai State Guesthouse in Beijing, China, Saturday, July 8, 2023. Mark Schiefelbein/Pool via REUTERS