Davos 2023: Global recession most likely in 2023, say economists at World Economic Forum

World Economic Forum: Economists attending the World Economic Forum (WEF), which opened in Davos on Monday, have said that the world can slip into recession in 2023, with pressures on food, energy, and inflation would be peaking. The WEF Chief Economist's Outlook, January 2023, stated: “Global growth prospects remain anaemic, and global recession risk is high.” 

As per the Chief Economists Outlook survey, countries like India and Bangladesh can benefit from the global slowdown with the diversification of manufacturing supply chains away from China. 

All the Chief Economists surveyed by the Forum for the Chief Economists Report expected weak or very weak growth for Europe in 2023, due to the ongoing war in Ukraine, food inflation, and the energy crisis, while 91 per cent expected weak or very weak growth for the US. This is a major slump since the last survey in September when these figures were 86 per cent for Europe and 64 per cent for the US.

They added that businesses all over the world are expected to cut costs significantly in response to economic headwinds, but chief economists are optimistic about inflation and strong balance sheets. 

"With two-thirds of chief economists expecting a worldwide 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," WEF Managing Director Saadia Zahidi said. 

"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," she added. 

Global economy 

The report noted that in the past 12 months, the world has seen the economic fall-out from both the Covid-19 pandemic and the war in Ukraine, which has slowed growth, sent inflation soaring as both food and energy prices rose and forced policymakers into tightening fiscal policy. 

The World Bank has said that the world will fail to eradicate poverty by 2030 – and instead, given current trends, there will still be 574 million people (almost 7 per cent of the global population) living on less than $2.15 a day, with most of those in Africa. 

Global food production, including staples such as rice and wheat, is unlikely to replenish depleted inventories, at least in the first half of 2023, Reuters reported in December, due to extreme weather events, the war in Ukraine, and high energy costs. Food import costs were on course to hit a record $2 trillion in 2022, forcing poor countries to cut consumption. 

Higher interest rates are having knock-on effects on emerging markets, with many now struggling to service their debts. 

Between 2022 and 2026, it’s estimated emerging and developing countries will have financing needs of $2.5 trillion, which could trigger a debt crisis, as per the Finance for Development Lab. 

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