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Davos Leaders: Global Recession ‘Likely’ To Happen In 2023

A full two-thirds of senior corporate and business leaders meeting at the 2023 World Economic Forum (WEF) in Davos, Switzerland, expect a global recession in the current year. The experts have warned that geopolitical tensions including Russia’s war in Ukraine will continue to weigh negatively on the global economy and said they anticipate further tightening of monetary policies in Europe and the United States.

‘‘The global economy is in a precarious position,” WEF managing director Saadia Zahidi has declared. According to Zahidi, the investments necessary to boost economic growth and avoid such an economic contraction will be hampered by the current high inflation, high debt, low growth and high fragmentation environment.

The experts have issued a very dire outlook for Europe, where 100 % of those surveyed expect “weak or very weak” economic growth this year. The United States is not much better off with 91 % of respondents saying they expect the economy to weaken in 2023. They are, however, more positive about China with only 48% expecting a negative outcome while 68% say that Latin America will experience a recession.

Not everybody is that pessimistic though, “The possibility of getting a soft landing is greater than the market believes,” Jason Draho, head of Asset Allocation Americas of UBS Global Wealth Management and Chair of the US Investment Strategy Committee, has said, as cited by the New York Times. 

Meanwhile, a variety of factors, including a sooner-than-expected reopening of China’s economy; a sustained fall in U.S. inflation as well as warmer-than-normal winter in energy-strapped Europe--are combining to ease some of the gloom that engulfed financial markets at the end of 2022 and helping increase hopes the world can dodge a recession. Still, with the Federal Reserve, European Central Bank and several of their peers still pushing ahead with higher interest rates as they try to lower inflation further, the risk of an economic slump or even full-blown recession later in the year can’t be entirely dismissed, especially if inflation remains higher than expected.

By Alex Kimani for Oilprice.com

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