The Risk of Global Recession is on Rise: What You Need To Know

The likelihood of the U.S. economy tipping over and into a recession within the next year is progressively rising although, according to Goldman Sachs economists, any foreseeable economic downturn does appear to be somewhat shallow. Goldman Sachs doubled its recession-risk forecast since mid-April and now sees a 30% chance of a slowdown over the next 12 months. “We now see recession risk as higher and more front-loaded,” Goldman economists David Mericle and Ronnie Walker wrote in research released late Monday, June 21.

Citigroup, on the other hand, has warned that the probability of a global recession is now nearing 50 percent, as central banks move to stamp out inflationary pressures caused by continuing supply-chain disruptions. In the United States, Federal Reserve Chair Jerome Powell acknowledged on Wednesday, June 23 the possibility that further interest rate hikes could derail economic growth – but stressed that the central bank must not fail in its efforts to control rising consumer prices.

The Fed is widely expected to boost rates again next month, by possibly another 0.75 percentage points, after increasing them by a similar amount last week. Such a move would put further upward pressure on global borrowing costs, potentially exacerbating the risks of a recession.

Policymakers around the world are facing a difficult balancing act in the months ahead, as they seek to support growth while also keeping a lid on inflationary pressures. The warning signs and forecasts underscore the challenges that lie ahead and highlight the need for careful policy management to avoid a global economic downturn.

With input costs rising and growth slowing, many companies are starting to feel the squeeze. In China, several major manufacturers have announced plans to raise prices for their products, while in the United States, General Motors has said it will cut production due to parts shortages. The situation is being exacerbated by geopolitical tensions including the recent escalation in tensions between Russia and Ukraine also represents a potential risk to global growth, as it threatens to disrupt supplies of key commodities such as natural gas.

In light of these risks, it is clear that companies need to be prepared for anything including the potential recession, just as these past two years have taught us. They should take steps to reduce costs and increase efficiency, while also stockpiling key supplies in case of further disruption.

Companies have showcased in more ways than one just how resilient and agile they can be amidst global lockdowns and worldwide shutdowns, so this forecast is not to strike fear in anyone, but to raise awareness and to remove the veil of uncertainty so that companies can take the proper and appropriate precautions early to secure their operations, mitigate risk as proactively as possible, and future proof operations.