Chief economists say global recession ‘likely’ in 2023

Challenges in the economy appear to have spilled into the new year, as chief economists surveyed by the World Economic Forum believe a global recession is likely in 2023.

During WEF’s annual meeting held in Davos, Switzerland, business and government leaders gathered to discuss insights and plans on the world’s most urgent issues.

A topic that cast a long shadow on the meeting was the expectation of a global recession this year.

Two-thirds of private and public sector chief economists surveyed by WEF expect a world recession, with 18 per cent of economists saying it is “extremely likely”. This is over twice as many as in the previous survey conducted in September 2022.

Only one-third of those surveyed said viewed the recession as unlikely.

“The current high inflation, low growth, high debt and high fragmentation environment reduces incentives for the investments needed to get back to growth and raise living standards for the world’s most vulnerable,” WEF managing director Saadia Zahidi said in a statement accompanying the survey results on Monday, 16th January.

WEF’s survey was based on 22 responses from a group of senior economists drawn from international agencies, including the International Monetary Fund, investment banks, multinationals and reinsurance groups.

The survey comes after the World Bank had slashed its 2023 growth forecasts to levels close to recession for many countries as the impact of central bank rate hikes intensifies, Russia’s war in Ukraine continues, and the world’s major economic engines sputter.

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While definitions of what constitutes recession differ around the world, they generally include the prospect of shrinking economies, possibly with high inflation in a “stagflation” scenario.

On inflation, the WEF survey saw large regional variations: the proportion expecting high inflation in 2023 ranged from just five per cent for China to 57 per cent for Europe, where the impact of last year’s rise in energy prices has spread to the wider economy.

Other main findings of the survey included:

– Nine out of 10 respondents expect both weak demand and high borrowing costs to weigh on firms, with more than 60 per cent also pointing to higher input costs.
– these challenges are expected to lead multinational businesses to cut costs, from reducing operational expenses to laying off workers
– however, supply chain disruptions are not expected to cause a significant drag on business activity in 2023
– the cost-of-living crisis may also be nearing its peak, with a majority (68 per cent) expecting it to have become less severe by the end of 2023.

With news from AAP.