With the global economy in an unfavourable position after more than two years of epidemics and the war in Ukraine, the question of whether there will be an immediate recession has become a major concern for many people. Some economists have expressed their opinions that the cost of many products will rise and economic growth will be slow, but that a global recession is not very urgent.
Before the pandemic, global growth was expected to reach higher levels in 2020 and 2021, but the reality is that the pandemic has affected the economy. In 2022, the Russian-Ukrainian war has caused huge global economic losses, such as the rapid rise in fuel and food prices that have hit the survival of vulnerable groups in many countries. Global growth is expected to decrease from 6.1% in 2021 to 3.6% in 2022, and it is clear from this figure that the global economy has suffered a huge impact.
From this slightly dire situation, many central banks have taken different measures to deal with the current state of the economy. Firstly, the Federal Reserve (Fed) has been reducing its balance sheet since May and has definitely completed its first interest rate increase in three years, and its officials have indicated that they will also reduce their expectations for economic growth at the same time. Secondly, the Bank of Canada (BoC) has raised the overnight rate by 50 bps which is the largest increase since May 2020, and they want to curb rising inflation and ease the spike in unemployment by raising the rates sharply. At the same time, the Bank of England (BoE) has raised the Bank Rate by 25 points in order to prevent inflation from becoming more severe. However, the UK economy is now growing more slowly than expected and with the pound facing a significant change in the exchange rate, the future looks less promising.
Additionally, many economic indicators can be used as signals to predict and analyse recessions, including gross domestic product (GDP), people's real personal income, unemployment levels and measures of commercial activity, such as retail sales and industrial production. However, despite a large number of indicators available, economists are unable to predict recessions perfectly, especially when they are caused by unexpected events.
Different people have different attitudes about whether the economy is in a recession or not. In May, a Bloomberg survey of economists showed a 30% chance of recession next year and much of the recent turmoil in the stock market has been closely linked to predictions of a recession. At the beginning of June, JPMorgan Chase CEO Jamie Dimon said that although the economic situation appeared to be developing peacefully, there was an economic storm coming. He also said no one knew whether the storm was a breeze or a hurricane, and it was uncertain whether the Federal Reserve would be able to handle it. Furthermore, Matt Zeitlin believes that even if a recession is imminent, it will be a more ordinary recession rather than a severe one like the one in 2008.In conclusion, it is clear from the above that a recession is likely to emerge and have an impact in the future, but fortunately, this has been foreseen and the central banks have already begun to regulate it.