Over the next 12 months, there is a possibility for many leading economies in the world to enter recessions amid tight government policies, reported a Japanese financial holding company Nomura Holdings Inc. Along with government policies, the living costs of many countries have pushed the global economy into a synchronized growth slowdown, the chief economist of Nomura Holdings reported.
The brokerage expects the eurozone, the UK, Japan, South Korea, Australia and Canada to fall into recession along with the US, Rob Subbaraman and Si Ying Toh-2 researchers at Nomura said in a research note. However, the intensity of the recession, the duration, the aftermath, etc will vary among nations. In the US, Nomura forecasts a shallow but long recession of five quarters starting from the final quarter of this year. In Europe, the slump could be much more profound if Russia entirely cuts off gas to Europe, the economists said. Nomura sees the US and the euro area economies contracting 1% in 2023, CNBC reported.
To get inflation down, many of the big economies’ central bank has already taken measures in order to limit the big impact of the recession. Many of the banks have shifted to essentially a single mandate. “Monetary policy credibility is too precious an asset to lose. So they’re going to be very aggressive,” Rob Subbaraman, who is also head of global markets research, Asia ex-Japan said in his statement about recession.
When the mid-sized economies are taken into account, there’s a risk of deeper-than-forecast recessions if interest rate hikes trigger housing busts. The mid-sized economies such as Australia, Canada, and South Korea, will get affected by this. Korea is taking the sharpest early hit with a 2.2% contraction in the third quarter of this year.
However, most of the governments in big as well as mid-sized economies are trying their best to regain control of the inflation narrative, to break the upcoming recession. The U.S. Federal Reserve and the European Central Bank are among those seeking to tamper with record inflation with rate hikes.