(PRESS RELEASE) GENEVA, 16-Jan-2023 — /EuropaWire/ — The World Economic Forum, an international NGO committed to improving the state of the world, has announced that according to a survey conducted by the World Economic Forum’s Community of Chief Economists, a global recession in 2023 is likely. The survey, which was launched at the World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, found that two-thirds of chief economists surveyed believe a global recession is likely in 2023, with 18% considering it extremely likely. This marks a significant increase from the previous survey conducted in September 2022.
The outlook for growth in 2023 is bleak, with all chief economists surveyed expecting weak or very weak growth in Europe, and 91% expecting weak or very weak growth in the United States. This represents a decline from the figures reported in the last survey, which were 86% for Europe and 64% for the United States.
In China, expectations for growth are more divided, with respondents nearly evenly split between those who expect weak or strong growth. The recent decision to unwind the country’s highly restrictive zero-COVID policy is expected to boost growth, but its impact on the economy and public health remains to be seen.
On the topic of inflation, chief economists see significant variation across regions, with the proportion expecting high inflation in 2023 ranging from 5% for China to 57% for Europe. Despite a year of sharp and coordinated central bank tightening, chief economists expect the monetary policy stance to remain constant in most of the world this year. However, a majority expect further tightening in Europe and the United States.
The chief economists noted that 2023 is likely to involve a difficult balancing act for policy-makers between tightening too much or too little. In response to the economic headwinds, businesses are expected to cut costs significantly. However, the chief economists remain optimistic about inflation and strong balance sheets.
“With two-thirds of chief economists expecting a world-wide recession in 2023, the global economy is in a precarious position. 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,” said Saadia Zahidi, Managing Director at the World Economic Forum. “Leaders must look beyond today’s crises to invest in food and energy innovation, education and skills development, and in job-creating, high-potential markets of tomorrow. There is no time to lose.”
Multiple headwinds are also expected to exert a drag on business activity in 2023. Nine out of 10 respondents expect both weak demand and high borrowing costs to weight on firms, with more than 60% also pointing to higher input costs. These challenges are expected to lead multinational businesses to cut costs, with many chief economists expecting firms to reduce operational expenses (86%), lay off workers (78%) and optimize supply chains (77%).
More broadly, the chief economists expect the global landscape to remain challenging for businesses – 100% of respondents expect global geopolitical trends to continue redrawing the map of global economic activity along new geopolitical fissures and fault lines. This wider economic shift will likely reverberate through trade, investment, labour and technology flows, creating myriad challenges and opportunities for business.
One positive signal is that supply chain disruptions are not expected to cause a significant drag on business activity in 2023.
While the Forum’s Global Risks Report 2023 recently found the cost-of-living crisis to be among the world’s most urgent risks, the chief economists see the crisis potentially nearing its peak, with a majority (68%) expecting it to have become less severe by the end of 2023. A similar trend is evident in relation to the energy crisis, with 64% expecting some improvement by year end. In addition, survey respondents highlighted a number of potential sources of optimism at the start of 2023, including the strength of household finances, growing signs of easing inflationary pressures and continued labour-market resilience.
Notes to editors
About the World Economic Forum Annual Meeting 2023
The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information, please click here.
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The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. (www.weforum.org).