Many major economies will hit recessions over the next 12 months amid a rise in the cost of living and tightening government policies, Nomura Holdings Inc has said in a report, according to Bloomberg.
The brokerage firm expects the EU, the UK, Japan, South Korea, Australia, Canada and the US to enter into a recession, thereby pushing the global economy into a synchronized growth slowdown, Rob Subbaraman and Si Ying Toh at Nomura said in a research note.
They said that the central banks are likely to err by tightening the monetary policy in a bid to rein in inflation at the risk of sacrificing growth before cutting rates in 2023.
“Increasing signs that the world economy is entering a synchronized growth slowdown, meaning countries can no longer rely on a rebound in exports for growth, have also prompted us to forecast multiple recessions,” they wrote.
Nomura forecasts that the depth of recession will vary among nations. In the US, a shallow but long recession of five quarters starting from the final quarter of this year. In Europe, the slump could be much deeper if Russia entirely cuts off gas to Europe, the economists said.
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The Japanese financial services firm Nomura sees both the US and the euro area economies contracting 1 per cent in 2023.
For mid-sized economies, including Australia, Canada and South Korea, there’s a risk of deeper-than-forecast recessions if interest rate hikes trigger housing busts, they said.
Japan is forecast to have the mildest recession of the group owing to ongoing policy support and its delayed economic reopening, they added.
China is an outlier as its economy recovering with the help of accommodative policies, though it remains at risk of renewed lockdowns as long as Beijing sticks to its zero-Covid strategy, they said.
(With inputs from agencies)
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