Two-thirds of private and public sector chief economists surveyed by the World Economic Forum (WEF) expect a global recession in 2023, Davos organizers said today at its annual meeting.
About 18% think a global recession is "highly likely" to happen. This is more than double the previous survey conducted in September 2022. Only a third of survey respondents saw it as unlikely this year.
"Current high inflation, low growth, high debt and a poor economic environment reduce the incentive for investment needed to record growth and improve living standards for the world's most vulnerable," WEF Managing Director Saadia Zahidi said in a statement. accompanying the results of the survey.
The organization's survey is based on 22 responses from a group of senior economists drawn from international agencies including the International Monetary Fund, investment banks, multinational companies and several key groups.
The survey comes after the World Bank last week cut its 2023 growth forecast to near-recession levels for most countries as the impact of central bank rate hikes deepens, Russia's war in Ukraine continues, and some of the world's major economies face challenges.
Definitions of what constitutes a recession vary around the world but generally include a shrinking economic outlook, 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 5% for China to 57% for Europe, where the effects of last year's energy price hikes have spread to the wider economy.
Majorities of economists see further tightening of monetary policy in Europe and the United States (59% and 55% respectively), with policymakers caught between the risks of tightening too much or too little.
Global moisture could pose risks to investments in areas ranging from education and health to tackling poverty and climate. Some see it driving inflation down and forcing the U.S. Federal Reserve to tighten. and other central banks from further rate hikes.
Other key findings of the WEF survey include:
Nine out of 10 respondents expect both weak demand and high borrowing costs to weigh on firms, with more than 60% also pointing to higher input costs.
These challenges are expected to push multinational businesses to cut costs, from reducing operating expenses to laying off workers.
However, supply chain disruptions are not expected to cause significant disruption to business activity in 2023.
The cost of living crisis may also be nearing its peak, with a majority (68%) expecting it to be less severe by the end of 2023.
