Recession predictions for the world's economy are unfounded
Leading economists from around the world spent the most of 2022 persuading themselves that, if the world economy wasn't already in a recession, it was about to enter one. However, the worldwide recession has been put off until 2023 as the year comes to an end.
Given how tight the labor market in the US is, it is obvious that rumors that the US entered a recession during the first half of the year were unfounded. Furthermore, the likelihood of a downturn in the upcoming year is significantly less than 100%, despite the certainty with which many once again predict its inevitable occurrence. However, a recession in 2023 has about a 50% possibility of occurring due to the US Federal Reserve and other major central banks' quick interest rate increases.
Europe, which has been severely impacted by rising energy prices, is more likely to enter a recession, which is generally defined as two consecutive quarters of declining GDP. But it appears that China is in even worse shape. Due to the Chinese government's recent decision to reopen the economy without a strong enough vaccination drive, it faces the same issues as Europe, as well as a failing real estate industry and an increase in COVID-19 cases.
Even though it is anticipated that China's development will be significantly slower than the historical rate at which it has grown over the previous four decades, it is doubtful that its GDP will decline for two quarters. In fact, even an eight percentage point drop in Chinese GDP growth at the height of the global financial crisis in 2008 did not result in
Furthermore, many nations' current economic problems are self-inflicted because of anticipated yet costly policy mistakes. For instance, between 2011 and 2021, Europe unnecessarily increased its reliance on Russian natural gas, making it extremely vulnerable when the Kremlin began its conflict with Ukraine. China's tight zero-COVID policy also had a huge financial cost, and the country's containment efforts only served to delay COVID fatalities because there was no mechanism in place to reduce pandemic restrictions.
For its part, the US has committed a number of errors, including voluntarily ceding control of the liberal international order and neglecting the World Trade Organization and the trade agreements that its members had negotiated over a long period of time. Trump's tariffs were incorrect, but Joe Biden
There are indications that the "everything bubble" has finally burst, even though the anticipated negative repercussions of increasing interest rates have not yet materialized.
While the anticipated negative impacts of increased interest rates have not yet materialized, I asserted in July 2021 that the asset bubbles that dominate the financial markets had a 90% chance of popping. Although real and even nominal interest rates were zero or negative at this time last year, historically high valuations—relative to dividends, earnings, or incomes—were an evident indicator. A low discount rate made it possible to justify almost any asset price level as the present discounted value of future revenue.
Four asset classes screamed "I am a bubble" louder at the start of this year: meme stocks like GameStop, cryptocurrencies, NFTs, and special-purpose acquisition firms. Although each was original, if not always in a good way, they all failed by the time the
Even if the next fall definitely shouldn't be classified as a recession because the "two consecutive quarters" standard is too restrictive, next year will be a difficult year for the global economy. Rarely, if ever, did global growth in the years following World War II go below zero for more than one quarter. By that standard, the severe recessions brought on by oil shocks in 1974 and 1981 are not considered to be global recessions. With the two noteworthy exceptions of the 2008 global financial crisis and the 2020 COVID-19 crisis, emerging and developing countries typically experience positive growth even when there is an apparent recession. While the International Monetary Fund and Organization for Economic Cooperation and Development predict that global growth will decline to 2.2-2.7% in 2023 from 6.1% in 2021,
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