Most of the world’s major economies will enter recession in the next twelve months, Nomura estimates, as tightening monetary policy and rising living costs push the global economy into a synchronized growth slowdown.
In particular, the Japanese brokerage expects the eurozone, UK, Japan, South Korea, Australia and Canada to enter recession alongside the US, Rob Subbaraman and Si Ying Toh said in a research note. Nomura.
According to them, central banks seeking to restore their credibility in controlling inflation are likely to err on the side of policy tightening, going for particularly big tightening even if it “sacrifices” growth, before cutting interest rates in 2023. .
“Increasing evidence that the global economy is entering a synchronized growth slowdown, meaning that countries can no longer rely on a recovery in their exports, has prompted us to forecast multiple recessions,” Nomura analysts wrote in their note.
They estimate that high inflation is likely to persist as price pressures have now spread beyond goods to services, rents and wages.
In any case, the size of the recession is expected to differ between states. For the US, Nomura predicts a mild but long five-quarter recession starting in the last quarter of this year.
In Europe, the recession could be much deeper if Russia completely cuts off natural gas flows, Nomura economists estimate.
Nomura, however, sees both the US and eurozone economies shrinking by 1% in 2023.
For mid-sized economies such as Australia, Canada and South Korea, there is a risk of a deeper-than-expected recession if interest rate hikes trigger a slump in housing purchases.
Korea appears to be taking the hardest initial hit with a 2.2% contraction in the third quarter of this year.
Japan is projected to have the mildest recession, thanks to continued supportive policy and a delayed reopening of the economy from the pandemic, according to Nomura.
China is an exception according to analysts at the Japanese house, as its economy is recovering with the help of easing policies, although it remains at risk of further lockdowns as long as Beijing maintains its zero-Covid strategy.