There is a 98% chance of a global recession, warns a research company

New York ( Business) — Alarm bells in the global economy are flashing as high inflation, sharp interest rate hikes and the war in Ukraine take their toll.

There is currently a 98.1% chance of a global recession, according to a probability model produced by Ned Davis Research.

The only times the recession model has been this high have been during severe economic downturns, most recently in 2020 and during the global financial crisis of 2008 and 2009.

“This indicates that the risk of a severe global recession is rising by some point in 2023,” economists at Ned Davis Research wrote in a report last Friday.

As central banks step up their efforts to rein in inflation, economists and investors are growing more pessimistic.

Seven out of 10 economists surveyed by the World Economic Forum consider a global recession to be at least somewhat likely, according to a report published on Wednesday. Economists have lowered their growth forecasts and expect inflation-adjusted wages to continue to fall for the rest of this year and next.

Given the increase in food and energy prices, there is concern that the high cost of living could generate pockets of unrest. 79% of economists surveyed by the World Economic Forum expect rising prices to trigger social unrest in low-income countries, versus an expectation of 20% in high-income economies.

Investors are also growing concerned as the Dow Jones Industrial Average plunged into a bear market on Monday for the first time since March 2020.

“Our main assumption is a hard landing by the end of 23,” billionaire investor Stanley Druckenmiller said at the CNBC Delivering Alpha investor summit on Wednesday. “I’ll be shocked if we don’t have a recession on the 23rd.”

Even Federal Reserve officials have admitted that there is a growing risk of a recession.

Still, there are points of optimism, especially in the United States, the world’s largest economy.

The US labor market remains historically strong, with the unemployment rate near the lowest levels since 1969. Consumers continue to spend money and corporate profits are strong.

There is also hope that the worst US inflation in 40 years will cool down in the coming months as supply catches up with demand.

The Ned Davis researchers said that while recession risks are rising, their US recession probability model “remains at minimal levels.”

“We have no conclusive evidence that the United States is currently in a recession,” the researchers wrote in the report.