Nomura Holdings Inc has said a number of major economies will hit recession by 2023 due to tense government policies and increasing living costs, forcing the growth of global economy to slow down.
Rob Subbaraman and Si Ying Toh, economists at Nomura, said in a research note that the brokerage has predicted nations, including the euro zone, the UK, Japan, South Korea, Australia and Canada, even the US, will go into recession.
The experts said that the central banks are still working to restore their methods and strategies to control inflation, but "are likely to err on the side of tightening policy too much even if it sacrifices growth, before cutting rates in 2023," they said.
"Increasing signs that the world economy is entering a synchronised growth slowdown, meaning countries can no longer rely on a rebound in exports for growth, have also prompted us to forecast multiple recessions," they wrote.
"High inflation is likely to persist as price pressures have spread beyond commodities to services items, rentals and wages," the note said.
"The depth of recession will vary among nations. In the US, Nomura forecasts a shallow but long recession of five quarters starting from the final quarter of this year. In Europe, the slump could be much deeper if Russia entirely cuts off gas to Europe," the economists said.
Nomura predicts that the US and the euro area economies will be contracting 1% in 2023, reports Bloomberg.
There is a risk of deeper-than-forecast recessions if interest rate hikes trigger housing busts for mid-sized economies, including Australia, Canada and South Korea, they said.
In the third quarter of 2022, Korea appears to be taking the sharpest early hit with a 2.2% contraction.
"Japan is forecast to have the mildest recession of the group thanks to ongoing policy support and its delayed economic reopening," they added.
China is an outlier as its economy is recovering with the help of accommodative policies, though it remains at risk of renewed lockdowns as long as Beijing sticks to its zero-Covid strategy, states Nomura.