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Updated January 17th, 2023 at 09:46 IST

Global recession 'extremely likely' in 2023; India may benefit from global trends: WEF

Members of the World Economic Forum’s Community of Chief Economists have predicted a worldwide recession in 2023, with almost 18% saying it is extremely likely.

Reported by: Isha Bhandari
Global recession
Image: ANI | Image:self
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As geopolitical stress continues to influence the world economy and additional monetary tightening in the United States and Europe, members of the World Economic Forum’s Community of Chief Economists have predicted a worldwide recession in 2023, with almost 18% saying it is “extremely likely”.

“Almost two-thirds of respondents consider a global recession to be likely in 2023. Including 18% who consider it extremely likely, more than twice as many as in the previous survey in September 2022,” according to ‘The January 2023 Chief Economic Outlook’ by the World Economic Forum’s Centre for the New Economy and Society. 

The survey was conducted in September-November 2022. 

Varying opinions 

Though opinions vary, some respondents believe that a worldwide recession this year is unlikely.

War and international tensions continue to influence global economic developments and every respondent viewed it as likely, with 73% saying somewhat and 27% saying extremely, that patterns of economic activity will continue to shift around the world in line with new geopolitical fissures and faultlines.

Aim of the survey 

In order to address the accumulating shocks to the global economy from geo-economic and geopolitical events, the survey attempts to summarize the evolving contours of the current economic situation and recommend priorities for further action by policymakers and business leaders. 

Regionally, the US and Europe are currently in a precarious position,  with 100% of chief economists expecting weak or very weak growth for 2023 in the former and 91% in the latter, the survey reads.

Expected strongest regions in 2023

According to the survey, the two strongest regions in 2023 are the Middle East and North Africa (MENA) and South Asia. 

In South Asia, 85% of respondents expect moderate (70%) or strong (15%) growth, a modest improvement since the September edition. Some economies in the region, including Bangladesh and India, may benefit from global trends such as a diversification of manufacturing supply chains away from China. 

No regions slated for “Very High” inflation 

No region is anticipated to see extremely high inflation, with responses anticipating high inflation ranging from 57% for Europe to just 5% for China. The major economists surveyed believe that this year will see a continuation of the sharp and coordinated tightening of monetary policy that was seen last year.

However, a majority of respondents expect further tightening in Europe and the US with 59% and 55%, respectively. 

Concerns about the cost of living 

In many nations, concerns about the cost of living are still quite pressing at the beginning of 2023. However, respondents to the survey suggest that the cost of the living problem may be nearing its height, with the majority (68%) anticipating that it would have subsided by the end of 2023. The energy issue is following a similar pattern, with over two-thirds of respondents confident that things will start to get better by the end of the year.

Source of optimism 

In the survey, chief economists were also asked to identify any reasons for hope in the current state of the world economy. Three factors were mentioned repeatedly: The strength of household balance sheets, the peaking of inflation, and the resilience of labour markets.

Despite some encouraging signs in the final months of 2022—a reduction in inflationary pressures, a slight improvement in consumer sentiment, and a stabilisation of commodity prices— almost one in five respondents now consider a global recession to be extremely likely in 2023, more than twice as many as in the previous survey in September 2022.

However, 32%, more than twice as many as in September, also believe a global recession to be extremely unlikely or somewhat unlikely. This polarised outlook is the result of declining growth expectations in the majority of regions, but not all, and persistently high uncertainty regarding the success and duration of tightening policy measures.

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Published January 17th, 2023 at 09:46 IST

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