(PatriotWise.com)- Top officials at some of the world’s largest banks are warning that the global economy may soon enter a major recession.
The CEO of Deutsche Bank, Christian Sewing, spoke in Germany on Wednesday at the Future of Finance Summit, and said that multiple strains are causing the global economy to buckle. That includes increased food prices and issues with the supply chain that are causing massive problems, especially in some of the world’s poorest countries.
Sewing said that he long expected central banks to increase interest rates as a way to curb the rise of prices, but the fast pace it’s happening at now is surprising him.
As he said at the summit:
“At least I would say we have 50% likelihood of a recession globally. [In the U.S. and Europe] the likelihood of a recession coming in the second half of 2023, while at the same time the interest rates go up, is obviously up versus the forecasts we had before the war broke out,” with Russia invading Ukraine.
That same day, top analysts with Citigroup Inc. predicted a similar forecast for the global economy. Their forecast was based on higher interest rates as well as supply chain issues.
While Sewing was saying he was concerned about the future economic impact of the rising interest rates, he supported the moves that central banks were taking to try to curb inflation, including the Federal Reserve in the U.S. He said these moves are necessary to curb inflation down to a level that’s more sustainable, which he said would be an overall risk to democracy.
Some delegates who attended the Qatar Economic Forum earlier in the week warned the U.S. was headed toward a big recession. And earlier in the month, the head of JPMorgan Chase & Co., Jamie Dimon, said that investors should prepare for an economic “hurricane” while the economy continues to struggle with all the challenges it’s facing.
In a note, economists with Citigroup wrote:
“The experience of history indicates that disinflation often carries meaningful costs for growth and we see the aggregate probability of recession as now approaching 50%. Central banks may yet engineer the soft — or ‘softish’ — landings embodies in their forecasts (and in ours), but this will require supply shocks to ebb and demand to remain resilient.”
According to Citigroup, they believe that the economy will grow 3% for the rest of this year, and then at 2.8% in 2023. If a recession were to happen, the company’s economists said it would be more of the “garden variety” type, during which the unemployment rate would increase by several points while output would have a few weak quarters in a row.
The company’s economists said:
“We see this as a reasonable expectation, but the wildcard — as we have emphasized — is how stubborn inflationary dynamics ultimately prove to be.”
For his part, Sewing has been critical of countries that have loose economic policies, specifically in Europe.