According to the NDR (Ned Davis Research), there is a 98.1% chance of a Global Recession in 2023 due to rising inflation, the Russo-Ukraine war, and Extremely High-Interest Rates. It says, “History repeats itself.” Like the 1920s recession caused a decade-long depression, the 1970s oil crisis caused a year-long recession, and the 2008 Great Recession are nothing like the ones that are plausibly arriving in the coming days. The predicted recession is not like any recession that has occurred in history. But if it is the one, it is not going to be like anything that has happened before.
What is Global Recession?
Global Recession is a financial phenomenon in which the economy of the whole world declines gradually for a long time. There has always been a butterfly effect behind every recession. And the culmination of many small drawbacks eventually turns into the recession we have witnessed before.
The prime causes of the Global Recession come from two things: High Unemployment and Low GDP (except for the current situation). GDP means that economic numbers have been adjusted to account for inflation so that they can be more accurately compared to other quarters of economic activity.
The Great Recession of 2008
It was an unforgettable event in the history of the twenty-first century when the whole world suffered a financial crisis within a few years. The recession began during the first half of 2000 when Americans popped out of the housing bubble and all the investors fell into economic distress. It followed suit with unemployment, price hikes on commodities, the crash in the stock market, and billions of dollars of IMF investment to stabilize the economy. Still, the horrors are carried out by the direct sufferers of those events.
Is Global Recession Coming in 2023?
There are a few primary causes of the upcoming Global Recession.
1. COVID Pandemic Lockdown
1. The pandemic lockdown has the greatest impact on the coming recession. During the COVID time, many lost their jobs and millions of completely new job sectors have been generated by them.
2. A great number of financial securities have been created and a massive number of job sectors opened up.
3. During the pandemic lock, people didn’t have places to visit and invest so just after the lockdown eased up, there have been great hikes in demand.
4. However, during the lockdown, many production houses shut down and employees were reduced. Thus there is a blatant disbalance of supply and demand after the lockdown.
5. This resulted in high inflation (fueled by the Russo-Ukraine war) and the world banks are increasing the interest rates (raising global monetary-policy rates) to control the inflation. But there is a slight chance of success with this method.
2. Low Unemployment
1. Although in all the previous Global Recessions, the lack of job opportunities has been a common phenomenon. But this time, the case is totally different. The unemployment rate is decreasing every day. Approximately 11 million jobs are out there in the US without any employment. And as the pandemic lockdown pushed towards entrepreneurship and inventive small businesses, there were available vacancies in big companies.
2. According to experts, it is theoretically predicted that the unemployment rate will decline. But many companies say they are unlikely to fire workers as it is already pretty hard to find workers after the lockdown.
3. Russo-Ukrainian War
1. Commodities’ (Russia and Ukraine are two of the major commodities: wheat producers who provide 30% of total global export) costs are and will be driving up inflation, eroding earnings and reducing demand.
2. Business confidence and investor uncertainty will impact asset values, tightening financial status and perhaps increasing capital outflows from developing nations.
4. Rise of Interest Rates
According to the World Bank, if supply disruptions and labor market pressures don’t go away, the interest rate hikes could push global core inflation (excluding energy) up to about 5% in 2023. This is almost twice as high as the average for the five years before the pandemic. The report’s model states that to cut global inflation to a rate consistent with their targets, central banks may need to raise interest rates by an additional 2 percentage points. If this were accompanied by financial-market stress, global GDP growth would slow to 0.5 percent in 2023—a 0.4 percent contraction in per capita terms that would meet the technical definition of a Global Recession.
5. Pessimistic View and Cut Back of Investment
Just like the previous years of 2007, when Americans started coming out of the housing bubble and selling off their loaned houses, this time people can cut back their investments as well. This is a common attribute of the Global Recession where people go through a pessimistic mood, causing them not to invest. This will be the breakthrough of the Great Recession of 2023.
The world is in a very unsustainable state of low unemployment and low GDP. Either companies will reduce job circulation and exit the labor market, or inflation and interest rates will re-create the history of the financial crisis. Now it is just a matter of time when and what Pandora’s box is about to open in the near future.