The world’s top chief economists expect a global recession in 2023, see geopolitical tensions continuing to shape the economy and anticipate further monetary tightening in the US and Europe. The conclusions are included in the World Economic Forum’s Chief Economists Outlook survey, whose annual meeting began today in DavosKlosters, Switzerland.
According to the poll, nearly twothirds of leading economists believe a global recession is likely in 2023, with 18% believing it is “extremely likely” more than double the previous poll, conducted in September 2022. , a third of respondents consider a global recession unlikely this year.
The consensus is that growth prospects for 2023 are poor, particularly in Europe and the United States. All of the top economists surveyed expect weak or very weak growth in Europe in 2023, while 91% expect weak or very weak growth in the US.
This marks a deterioration in recent months (at the time of the last survey, the corresponding figures were 86% for Europe and 64% for the US).
For China, growth expectations are polarized, with respondents split almost evenly between those expecting weak and strong growth. Recent moves to ease the country’s highly restrictive Covid19 policy should boost growth, but it’s unclear how disruptive the policy change will be, particularly in terms of its health implications.
After many calls for transparency on data on the pandemic, Chinese authorities reported this weekend that nearly 60,000 people have died from Covid19 since the country abandoned a zerotolerance policy in late 2022.
monetary policy
After a year of strong and coordinated tightening by central banks last year, leading economists said they expect monetary policy to remain constant in most parts of the world this year.
Most expect further tightening in Europe and the US (59% and 55% respectively). They noted that 2023 is likely to be a difficult balancing act between too much and too little tightening for policymakers.
“The current environment of high inflation, low growth, high debt and fragmentation reduces the incentives for investment needed to return to growth and raise living standards for the world’s most vulnerable,” said Saadia Zahidi, executive director of Economic Forum World.
“Leaders need to look beyond today’s crises and invest in food and energy innovation, education and skills development, and the creation of highpotential jobs and markets. There’s no time to waste.”
When it comes to doing business in 2023, nine in ten respondents expect weak demand and high borrowing costs to weigh on businesses, with over 60% also pointing to higher input costs. These challenges are expected to prompt multinationals to cut costs, with many chief economists expecting companies to cut operating costs (86%), lay off employees (78%) and streamline supply chains (77%).
Also according to the study, 100% of respondents expect that global geopolitical trends will continue to redraw the map of global economic activity, creating new fissures and geopolitical failures. This broader economic shift is expected to impact trade, investment, labor and technology flows and is projected to create myriad business challenges and opportunities.
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While the Forum’s Global Risks Report 2023 recently identified the cost of living crisis as one of the world’s most pressing risks, leading economists see a potential peak in the crisis, with a majority (68%) expecting it to become less severe by the end of 2023.
A similar trend is evident in relation to the energy crisis, with 64% expecting some improvement by the end of the year. In addition, panellists highlighted several potential sources of optimism in early 2023, including the strength of domestic finances, increasing signs of easing inflationary pressures and ongoing labor market resilience.