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Global Economists Divided on 2023 Recession Likelihood

Photo by José Martín Ramírez Carrasco / Unsplash

The global economic outlook remains uncertain, with chief economists divided on the likelihood of a recession in 2023, according to the latest Chief Economists Outlook report by World Economic Forum released on May 2.

The survey found that 45% of experts believe a global recession is likely this year, while the remaining 45% believe it is unlikely.

Growth and inflation dynamics are expected to vary widely across regions, with proactive industrial policies becoming increasingly prevalent over the next three years.

Growth expectations have strengthened since January 2023, with the most significant activity in Asia.

China's reopening is expected to boost activity across the continent. More than 90% of chief economists expect moderate growth in East Asia, the Pacific, and South Asia.

The outlook for the U.S. remains mixed, with growth prospects clouded by uncertainties about financial stability and the pace of monetary tightening.

Inflation expectations have risen, with 76% of senior economists predicting that the cost of living will remain high in many countries.

Europe and the US are the most inflationary regions, while China stands out, with only 14% expecting high inflation.

Despite recent bank failures and financial market turmoil, chief economists express confidence in the systemic integrity of global markets.

However, two-thirds expect more bank failures and disruptions, and more than 80% expect businesses to have difficulty securing loans due to tighter lending criteria.

High-interest rates are also expected to significantly disrupt the real estate sector in 2023-2024.

The structure of global supply chains is expected to change, with business strategies adapting to geopolitical fault lines, prioritizing resilience over efficiency, diversifying suppliers, and increasing focus on environmental sustainability.

Proactive industrial policy is expected to gain prominence, although concerns remain about deepening geo-economic tensions, stifling competition, and rising sovereign debt levels.

Saadia Zahidi, Managing Director of the World Economic Forum, stressed the urgent need for global policy coordination and a new framework for growth that integrates inclusiveness, sustainability, and resilience into economic policy.

The Growth Summit in Geneva on May 2-3 will address these critical issues, focusing on global growth, economic hotspots, competition and cooperation, employment, skills, and equity.