Davos Forum participants declare global recession in 2023
2023.01.16 07:40
Davos Forum participants declare global recession in 2023
By Tiffany Smith
Budrigannews.com – In a survey conducted by the World Economic Forum (WEF), two-thirds of chief economists from both the private and public sectors stated that they anticipate a global recession in 2023. This statement was made on Monday during the annual meeting of business and government leaders.
More than twice as many people responded to the current survey, which was conducted in September 2022, when they said that a global recession was “extremely likely.” Only a third of those who took part in the survey thought it was unlikely this year.
In a statement released in conjunction with the survey results, WEF Managing Director Saadia Zahidi stated, “The current high inflation, low growth, high debt, and high fragmentation environment reduces incentives for the investments needed to get back to growth and raise living standards for the world’s most vulnerable.”
The organization used 22 responses from senior economists from international organizations like the International Monetary Fund, investment banks, multinationals, and reinsurance companies as the basis for its survey.
The World Bank cut its 2023 growth projections for many countries last week to levels close to recession as the impact of central bank rate hikes grows, Russia’s war in Ukraine continues, and the world’s major economic engines sputter.
The possibility of shrinking economies and possibly high inflation in a “stagflation” scenario is generally included in definitions of what constitutes a recession.
The WEF survey found significant regional variations in inflation: China had just 5% of respondents who expect high inflation in 2023, while Europe had 57%, where the economy as a whole has been impacted by the rise in energy prices from last year.
The majority of economists (59 percent and 55 percent, respectively) anticipate further tightening of monetary policy in Europe and the United States, with policymakers caught between the risks of tightening too much or too little.
Some believe that a global slowdown would reduce inflation and force the U.S. Federal Reserve and others to hold off on further rate hikes, despite the fact that it would put investment in areas such as education, health, poverty alleviation, and climate change at risk.
Sumant Sinha, chairman and CEO of the Indian clean energy group ReNew Power, stated to Reuters on the sidelines of the Davos meeting, “I want the outlook to become a little weaker so that the Fed rates start going down and that whole sucking-out of liquidity by global central banks eases.”
He said, “That will benefit not just India but the world,” adding that the current round of rate hikes was making it more expensive for clean energy businesses to fund their capital-intensive projects.
Others asserted that, despite the fact that more affluent individuals would likely be spared the worst effects of the recession due to high inflation, groups with lower middle incomes would be severely affected.
Anthony Scaramucci, the founder of SkyBridge Capital, an investment firm based in the United States, stated, “If you only have your time and your energy which is creating your income, you’re getting ravaged right now because your wages are just not keeping pace.”
The WEF survey’s other main findings included:
– Nine out of ten respondents anticipate that firms will be weighed down by low demand and high borrowing costs, with over 60% also pointing to higher input costs.
– the cost-of-living crisis may also be nearing its peak, with a majority (68%) expecting it to have become less severe by the end of 2023.
– these challenges are expected to lead multinational businesses to cut costs, from reducing operational expenses to laying off workers. However, supply chain disruptions are not expected to cause a significant drag on business activity in 2023.
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