A global recession would be catastrophic for the world economy, with countries suffering a sharp contraction in growth and rising unemployment. And it could be coming soon. Several indicators have flashed warnings: the COVID-19 pandemic and its associated economic disruptions; persistently high inflation, which has led to a series of sharp policy rate hikes; and a weakening in consumer confidence, a harbinger of impending recessions in past decades.
But a global downturn will not be felt equally around the world, with the world’s emerging economies escaping much of its impact. The last global recession, in 2009, followed the worst financial crisis since the Great Depression of the 1930s and caused economic shutdowns that were felt more in developed economies than in developing ones. The economic outlook is gloomy globally, with the World Economic Forum’s Chief Economists Outlook survey this year showing nearly 20% of respondents see an extremely likely or probable global recession, double the number who saw one in the previous survey in September.
But, as economist Mark Zandi notes in a recent column for Reuters, it’s not yet time to panic. “The MM Global Recession Probability indicator, which measures the probability of a deterioration in global economic conditions over a three-month period, remains above 50%, indicating that the risk of a global recession has risen.” That’s still a long way from the levels seen in the late 1970s, when the US, Japan and Europe were all experiencing simultaneous recessions.