As many as two-thirds of senior corporate and business leaders gathered at the 2023 World Economic Forum (WEF) in Davos, Switzerland, expect a global recession this year. Experts warned that geopolitical tensions, including Russia’s war in Ukraine, would continue to weigh on the global economy and said they expected further tightening of monetary policies in Europe and the United States.
“The global economy is in a precarious position,” said WEF Managing Director Saadia Zahidi. According to Zahidi, the investment needed to stimulate economic growth and avoid such an economic contraction will be hindered by the current high inflation, high debt, low growth and highly fragmented environment.
Experts issued a very dire outlook for Europe, with 100% of respondents expecting “weak or very weak” economic growth this year. The United States is not much better with 91% of respondents saying they expect the economy to weaken in 2023. However, they are more positive about China, with only 48% expecting a negative outcome, while 68% say Latin America will experience a recession.
Not everyone is so pessimistic, however, “The possibility of a soft landing is greater than the market believes,” said Jason Draho, head of Americas asset allocation at UBS Global Wealth Management and chairman of the U.S. Investment Strategy Committee. , as quoted by the New York Times.
Meanwhile, various factors, including the earlier-than-expected reopening of China’s economy; a sustained decline in U.S. inflation, as well as a warmer-than-normal winter in energy-strapped Europe—combined to ease some of the gloom that engulfed financial markets at the end of 2022 and help boost hopes that the world can avoid recession. Still, with the Federal Reserve, the European Central Bank and several of their peers still pushing for higher interest rates as they try to further reduce inflation, the risk of an economic downturn or even an outright recession later in the year cannot be rejected outright, especially if inflation remains higher than expected. By Alex Kimani for Oilprice.com
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