Boards should communicate regularly to reduce stakeholder uncertainty

BY MOST accounts, 2023 will be a difficult year for most countries. The head of the International Monetary Fund (IMF), Kristalina Georgieva, warned recently of tough going because the main engines of global growth, namely the United States, Europe and China, will all experience weakening activity. The new year is going to be “tougher than the year we leave behind’’ she said.

The US Federal Reserve and other major central banks have been aggressively raising interest rates to combat spiking inflation that has been aggravated by the war in Ukraine and supply chain constraints from the Covid-19 pandemic. On top of these worries there are US-China trade tensions to contend with. A synchronised slowdown is all but certain, the only question being the extent. In Singapore, the official growth forecast for 2023 has been progressively lowered and now stands at 0.5-2.5 per cent, though a recession is not expected – at least not yet.

Borrowing costs have thus risen sharply and the uncertainty over where interest rates are headed has brought the prices of risk assets, mainly stocks, down sharply. Apart from banks for whom rising interest rates are likely to be beneficial, most other sectors are expected to face profit headwinds. As economic uncertainty rises, so will anxiety levels among corporate stakeholders – both holders of debt and equity.