Citi warns that in 2023 the global economy will be shaken by a “prolonged recession”. | Bot To News


The global economic outlook for 2023 is murky at best, economists at Citi warn.

“As we review the outlook for the global economy, we see many reasons for concern, including continued challenges from the pandemic and the Russia-Ukraine war, high inflation and headwinds from central bank rate hikes,” Citi chief economist Nathan Sheets wrote in a client note in Wednesday.

“Given these factors, the global economy is most likely to experience ‘rolling’ country-level recessions in the coming year.”

Citi believes the Eurozone and UK will enter recession by the end of this year. Sheets sees the U.S. entering recession by mid-2023 as consumers and businesses feel the full impact of the Federal Reserve’s higher interest rates.

The relative winner, believe it or not, may be China.

“We’re seeing growth [in China] accelerating as authorities soften zero-covid policy,” Sheets wrote.

“Still, excluding China, global growth next year will be close to some definitions of a global recession. On a more positive note, many of the recessions in our forecast are relatively mild and should help pave the way for improved performance through early 2024.”

An employee works on a production line for the production of steel structures at a factory in Huzhou, Zhejiang province, China, May 17, 2020. The picture was taken on May 17, 2020. China Daily via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY.  CHINA VEN.

An employee works on a steel structure production line at a factory in Huzhou, Zhejiang province, China, May 17, 2020. Picture taken May 17, 2020. China Daily via REUTERS

However, investors seem to have forgotten about this sluggish outlook for global growth in 2023.

Amid signs of easing inflation, lower oil prices and a renewed decline in the dollar, stocks have rallied since hitting recent lows in October. Over the past month, the Dow Jones Industrial Average (^DJI) rose 3%, the S&P 500 (^GSPC) gained 1.5%, and the tech-heavy Nasdaq Composite (^IXIC) was mostly flat.

Those gains are now under pressure as concerns grow over a controversial COVID-19 lockdown in China affecting major manufacturers such as Apple.

Just last week, strategists at Goldman Sachs took advantage of the renewed market weakness to recommend that investors gain more exposure to cash and lower risk in stocks and bonds.

“We remain relatively defensive over the three-month period with further headwinds from a likely rise in real yields and lingering growth uncertainty,” Goldman Sachs strategist Christian Mueller-Glissmann wrote this week.

BNP Paribas, meanwhile, also charted a tough path for the global economy and stocks.

“We expect global GDP growth to decline in 2023, led by recession in both the US and the Eurozone, with below-trend growth in China and many emerging markets,” BNP’s strategy team said in a note.

“We expect new lows in stocks in 2023. The correction in 2022 was largely valuation driven and we expect 2023 to be all about profits, supporting higher realized volatility.”

Brian Sozzi is the editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and onward LinkedIn.

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