Nomura Holdings (NYSE: NMR) predicts that many major economies will go into recession over the next 12 months because of tightening government policies and rising living costs.This will cause the global economy to grow more slowly at the same time.
Rob Subbaraman and Si Ying Toh at Nomura said in a research note that they expect the US, the eurozone, the UK, Japan, South Korea, Australia, and Canada to all go into recession at the same time.
Still, they said, if central banks want to prove they can control inflation again, they are likely to make the mistake of tightening policy too much, even if that hurts growth, before lowering rates in 2023.
“Increasing signs that the world economy is entering a synchronised growth slowdown have also led us to predict more than one recession,” they wrote. “This means that countries can no longer count on a rebound in exports for growth.”
The note said that high inflation is likely to last because price pressures have spread from goods to services, rent, and wages.
Each country will have a different level of recession. Nomura thinks that the US will go into a shallow but long recession starting in the fourth quarter of this year that will last for five quarters. Economists said that if Russia cut off all gas to Europe, the slump would be much worse in Europe.
Nomura thinks that the economies of both the US and the euro area will shrink by 1% in 2023.
They said that if interest rate hikes cause housing busts, which could happen in places like Australia, Canada, and South Korea, recessions could be worse than expected. In the third quarter of this year, Korea is expected to be hit the hardest, with its economy shrinking by 2.2%.
They added that they think Japan will have the mildest recession of the group because the government is still helping and the economy hasn’t started up yet.
China stands out because its economy is getting better thanks to policies that help it, but it is still at risk of more lockdowns as long as Beijing sticks to its “zero-Covid” plan.
2022 Bloomberg L.P.
