The annual KPMG Strategy Forum brought together board members, C-level business leaders, decision-makers and strategy experts from Finland's top 500 companies to listen to, and discuss with, our inspirational keynote speaker, Nobel-Prize winning economist Paul Krugman, and two insightful panelists, Minna Halme, Professor of Sustainability Management from Aalto University and Sixten Korkman, economist & author.

Strategy Forum is an event where leaders and experts meet to gain and share insights on local and global matters of fundamental interest. The world in general and business sentiment in particular have changed radically from last year, and we felt that many of the topics previously discussed deserved further attention and clarification. Hence, we invited Professor Krugman to join us again this year to reflect on the changes the world has undergone during the past 12 months, as well as to discuss the probable future directions.

We specifically want to understand how businesses should navigate on an unsteady surface and incorporate ESG into their growth agenda, while investing in technologies and digital readiness to support and defend business against unwanted disruptions.

Berndt Wickholm, Advisory Partner, KPMG Finland

A year ago, the world seemed full of uncertainties. However, none of us could have foreseen how drastically everything would change in 2022, and the implications this change would have on politics, business and the global economy in general. We are now faced with a completely new situation, whose full consequences are yet to be unveiled. 

Inflation – a different story on opposite sides of the Atlantic

In his keynote speech, Professor Krugman estimated that inflation is now the most significant problem for the global economy and a key reason why Europe is entering a recession. But, although the inflation rate is quite similar on both sides of the Atlantic, the US and Europe are dealing with different shocks.

— In the US, inflation is being driven largely by an overheated economy which means there is a 50-50 probability that the US will fall into recession. On the other hand, the situation in Europe is quite different as the economy is being hit by an extraordinary surge in headline inflation – largely due to the current state of the war in Ukraine and its effect on the energy market.

The price of gas has risen several times more in Europe than it has in the US.

— In Europe, the decision to stay dependent on the natural gas produced by Russia, despite all warnings, has proven to be a bad strategy with catastrophic consequences. In the US, gas prices, while increasing, are nowhere near the record high prices European economies have to cope with.

Despite his reputation as a libertarian economist, Krugman suggests that greater control of energy prices might help to limit macroeconomic disaster in Europe.

— The price of power can't rise so much, for much longer; it would lead to financial ruin for so many households – something no political system can tolerate.

Change of the game – but Krugman remains optimistic

Krugman also speculates that we will probably see a decline in globalization in the future. The leading western economies will change their trading patterns, resulting in less dependence on outsourcing from China, in particular. Such a development will be due to several factors. Technological advances and robotization will enable greater efficiency and cost savings at home, and thus, in the current geopolitical climate, traditional outsourcing abroad will become less important – as the savings made will not adequately compensate for the risks involved. In addition, there will be a shift towards more nationalistic economic policies, with more in-shoring, near-shoring and friend-shoring. In the US, politics are already impacting the localization of critical components, such as computer chips, through the new Inflation Reduction Act.

All-in-all, Krugman is relatively optimistic that Europe will ride out “the storm” and seize the opportunities that arise.

— The global economy will emerge victorious from all this tumult, because change means opportunity. I'm confident that if we were to hold this discussion again, two years from now, we would be saying: “Boy, that looked pretty scary back there, but, in the end, it turned out all right.”

Stay tuned for the next KPMG Strategy Forum in September 2023. In the meantime, KPMG Finland’s Global Strategy Group would love to continue the dialogue with you on the key questions you are facing – whether they concern, for example, adapting your strategy in the face of uncertainty, or redesigning your supply chains or business portfolios, or prioritizing your deal targets, or simply improving your deal execution and integration.

Listen to our experts reflect on the event topics

In the episode below we continue the discussion on the topics from Strategy Forum 2022 event. KPMG Finland's experts Sarah Sipilä and Jenna Hytti reflect on both the event and our previous podcast episode, where Sarah discussed with Paul Krugman about the global economy and recent world events.

Find all our Menestyksen Ytimessä podcast episodes here.