Economists are divided on the likelihood of a recession in the United States this year. According to a poll conducted by Bloomberg, 70% of economists surveyed predicted that the US would experience a recession in 2023, with GDP expected to show flat readings in the first and third quarters, and an annualized decline of 0.7% in the second quarter. These economists also predicted that the Personal Consumption Expenditures Price Index would reach 3% in the fourth quarter, leading to an unemployment rate of 4.9%.
A separate poll of professional economic forecasters from the National Association for Business Economics found that most respondents believed recessionary risks had surpassed 50%. This assessment was based on slower economic growth, higher inflation, and a weak labor market. However, the Conference Board’s Chief Economist, Dana Peterson, noted that panelists expected job growth to slow but remain positive over the first three quarters of 2023.
The World Bank also predicts that contractionary monetary policy in developed countries could increase the risk of a global recession. World Bank Group President David Malpass stated that he was concerned about the potential long-lasting consequences for people in emerging and developing economies. He emphasized the importance of policies that can generate additional investment and improve productivity and capital allocation for growth and poverty reduction.
On the other hand, Goldman Sachs estimates the risk of a US recession at 35%. The investment bank expects the US to “stick a soft landing” as inflation decreases and unemployment remains stable. Goldman Sachs Research Head Jan Hatzius noted that there are strong reasons to expect positive growth in the coming quarters, citing the expected increase in real disposable income to a pace of more than 3% over the next year.
Other major economies may also face challenges in the coming year. Europe is grappling with rising energy prices due to the Russian invasion of Ukraine and ambitious renewable energy goals, while China’s economy has been slowed by strict lockdown measures and the relocation of some businesses abroad. However, these difficulties in major economies could create opportunities for emerging markets like India, which is projected to become the world’s third-largest economy in the next decade.