Citigroup economists have forecast the chance of a global recession nearing 50 percent as central banks hike interest rates and consumer demand for goods drops off.
"Central banks may yet engineer the soft—or 'softish'—landings embodied in their forecasts (and in ours), but this will require supply shocks to ebb and demand to remain resilient."
According to the report, Citigroup economists now forecast the world economy to grow by 3 percent this year and 2.8 percent next year.
They added that if a recession were to occur it would likely be of the "garden variety" in which "unemployment rises several percentage points and output experiences a couple of weak quarters."
"We see this as a reasonable expectation, but the wildcard—as we have emphasized—is how stubborn inflationary dynamics ultimately prove to be,” they said.
The gloomy predictions from Citigroup economists come shortly after a survey by business research firm The Conference Board found that over 60 percent of global CEOs are expecting a recession in their primary location of operation by the end of the year 2023 or possibly earlier.
CEOs cited the war in Ukraine, volatility in energy prices, renewed supply chain disruptions and dwindling consumer confidence combined with COVID-19 lockdowns in China which they said are all "putting downward pressure on growth, leading to a significant drop in CEO confidence across the globe."
"These disruptions, along with restrictive monetary and fiscal policy, are fueling recession expectations," the report stated.
Furthermore, the report found that over half of the CEOs surveyed—51.3 percent—were managing inflation by passing price increases downstream, and 47.1 percent of CEOs are cutting costs in an effort to offset soaring inflation.
Fears are growing that a recession may be on the horizon, particularly in the United States where inflation reached 8.6 percent in May, prompting the Federal Reserve to raise the benchmark interest rate by 75 basis points this month.
"The likelihood is that the world is going to worry most about recession because what you’re describing is a lot of things going wrong at the same time, and a lot of them can’t be reversed, like war," said Roche, president and global strategist at Independent Strategy. "I doubt it can be avoided in Europe. But not a global recession depression, but the world is going to worry about that the most I think for the next couple of months at least," Roche added.