The continuing uncertainty of the global economic outlook is reflected in the striking spread of responses to the latest Chief Economists Outlook, showed the report on Tuesday.
In a survey featured in the report, experts are evenly divided on the prospects for the global economy, with equal shares of 45% saying that a global recession this year is likely or unlikely.
The report was organised by World Economic Forum’s Centre for the New Economy and Society.
Chief economists expect both growth and inflation dynamics to vary widely across regions, while on the economic policy front, 72% predict proactive industrial policy to become an increasingly widespread phenomenon over the next three years. Although a majority do not see recent financial-sector disruption as a sign of systemic vulnerability, further bank failures and turbulence are considered likely this year.
Divergent regional dynamics:
The most buoyant activity is expected in Asia, with China’s reopening expected to drive a significant rebound for the country and to bolster activity across the continent. More than 90% of the chief economists expect at least moderate growth in both East Asia and Pacific and South Asia.
At the other end of the spectrum, three-quarters of the chief economists still expect weak or very weak growth in Europe. In the United States, respondents were more optimistic in March-April than in January but are still divided on the outlook, with US growth prospects clouded by heightened uncertainty on financial stability and the likely pace and extent of monetary tightening.
On inflation, there was a marked uptick in all regions in the proportion of respondents expecting high inflation in 2023, and 76% of chief economists said they expect the cost of living to remain acute in many countries. Headline rates have begun to ease, but core inflation has been stickier than many expected. The dynamics are particularly stark in Europe and the US, where large majorities of the chief economists (90% and 68% respectively) expect high or very high inflation this year. China remains an outlier on inflation, with only 14% expecting high inflation this year.
Financial sector tremors :
In the wake of recent bank collapses and financial market turbulence, chief economists expressed confidence in the systemic integrity of global markets. However, two-thirds highlighted the likelihood of further bank failures and disruption, while more than 80% said they expect businesses to find bank loans more difficult to secure as a result of tightening lending criteria. They also pointed to the knock-on effects of high interest rates, notably in the property sector, where two-thirds expect high rates to cause significant disruption in 2023-2024.
Changing face of globalisation :
The chief economists were unanimous in anticipating further changes in the structure of global supply chains. When asked which business strategies they expect to contribute to this reconfiguration, they highlighted adaption to geopolitical fault lines (94%), the prioritisation of resilience over efficiency (91%), diversification of suppliers (84%) and an increased focus on environmental sustainability (77%).
