In 2023 it is predicted that there will be a global recession. What caused it?

In 2023 it is predicted that there will be a global recession. What caused it??

Tahbrontak - The forecast for 2023, which is marked by a global recession, has recently become a topic of discussion. This prediction itself comes from the report of the International Monetary Fund (IMF) to combat the cost of living crisis which was published on October 11, 2022. The report predicts global growth will slow down to 2.7 percent in 2023 from 3.2 percent in 2022. 

According to Tempo, the sectors most affected are the financial sector and sectors that depend on export activities. According to Minister of Finance Sri Mulyani, this prediction is not meant to frighten, but rather to inspire. Even with predictions of an economic recession next year, it's better to be prepared than to be too scared. Getting through a difficult 2020 can better prepare us for the projected 2023 recession. 

So, if a recession is real, what impact will it have? If exports falter, exporters will feel the impact. The cause of the recession in 2023 will be high inflation and prime interest rates, which are also rising with high energy and food prices. If demand is low, the company's sales may be affected. To reduce costs, companies usually cut wages or lay off employees (HK). Purchasing power and quality of life of people decreased and poverty increased. 

Minister of Finance Sri Mulyani predicts that there will be four countries safe from the threat of recession in 2023. They are Indonesia, India, Brazil and Mexico. According to him, world economic conditions are putting pressure on developing countries, but conditions in these countries are better than those in developed countries.

Meanwhile, countries such as the United States, Britain, Europe and China are said to find it difficult to avoid a recession. This is because high inflation soared in the country and made monetary policy tighten. This is reflected in the global economic outlook, which is predicted to slow down to only 2.7 percent in 2023. 

This slump is mainly influenced by the economic downturn in the US and European countries. The European economy is estimated to be low or shrink 1.2 percent in 2023. This is due to high inflation due to rising prices. 

Likewise, China is also considered difficult to avoid a recession. Moreover, the government has implemented several lockdowns which have made the economy even worse. China's economy in the second quarter of 2022 only grew 0.4 percent (year on year/yoy). This was recorded as the worst economic performance in the last two years, and in the third quarter of 2022 it is expected to remain low. 

The world economy is expected to enter a recession in 2023 due to the continuing increase in interest rates aimed at reducing inflation. According to research by the Center for Economics and Business Research (CEBR), a high interest rate policy will cause a number of economies to experience a contraction, so that the world will face a recession. 

In the annual World Economic League Table released by the British consultancy, the global economy will surpass US$100 trillion for the first time in 2022. That will stall in 2023 as central banks must still struggle to tame inflation. "It looks like the world economy will face a recession next year due to rising interest rates," said Kay Daniel Neufeld, Director and Head of Projections at CEBR as quoted by Bloomberg, Monday (26/12). 

Although interest rates have soared, the battle to tame inflation has not been won. CEBR assesses the cost of bringing inflation down to a safer level is the worse growth prospects for the next few years. The CEBR report is more pessimistic than the latest estimates from the IMF. This institution last October warned that a third of the world's economy would contract next year and 25% had the opportunity to grow below 2%. It is defined as a global recession.

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