Seven out of 10 chief economists believe a global recession is at least somewhat likely over the coming year, according to a new survey by the World Economic Forum (WEF).
About 64 per cent of those surveyed think that a global recession could likely occur in 2023, while 9 per cent said this scenario is extremely likely.
Since its May survey, the WEF found that expectations for growth have fallen across all regions, with nearly nine in 10 chief economists are now expecting weak growth in Europe next year.
“The grim outlook for growth is being driven in part by high inflation, which has triggered sharp monetary tightening across many economies,” it said.
“With the exception of China and the MENA [Middle East and North Africa] region, most of the chief economists surveyed expect high inflation to persist for the remainder of 2022, with expectations somewhat moderating in 2023.”
In particular, 93 percent of the respondents expect inflation will remain high in both the United States and Europe throughout the rest of this year.
But on the back of monetary tightening by the Federal Reserve and the European Central Bank, a majority of respondents expect moderate or low inflation in the US (57 per cent) and Europe (52 per cent) next year.
With the increased cost of living having a significant impact across most regions of the world, the WEF noted that the chief economists agreed that wages would fail to keep pace with surging prices in 2022 and 2023.
Around 89 per cent of the respondents predicted real wages will decline in low-income economies and 80 per cent expect they will fall in high-income economies.
“Growing inequality between and within countries is the ongoing legacy of COVID, war and uncoordinated policy action. With inflation soaring and real wages falling, the global cost of living crisis is hitting the most vulnerable hardest,” said WEF MD Saadia Zahidi.
“As policymakers aim to control inflation while minimising the impact on growth, they will need to ensure specific support to those who need it most. The stakes could not be higher.”
Meanwhile, 90 per cent of the economists agreed that heightened geopolitical risk will have a significant effect on global economic activity over the next three years.
The chief economists also expect that geopolitics will have an impact on corporate decision making (85 per cent) and global financial markets (69 per cent).
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.