A global recession is becoming increasingly likely due to stubbornly high inflation and real wages continuing to fall, the World Economic Forum said on Wednesday, citing a survey of chief economists from across the world.

According to the WEF Chief Economists Outlook report, real wages are expected to continue falling across the world in 2022-2023 and the cost of living crisis is threatening social unrest, though inflationary pressures are expected to ease in the next year.

The survey showed that food security could be at risk across large swathes of the globe over the next three years.

Referring to rising concerns about food security triggering export restrictions, which risk exacerbating global supply disruptions, the report said India, the world’s largest rice exporter, introduced a ban on exports of broken rice and a 20 per cent export duty on other grades of rice.

"Given that the stability of rice prices in 2022 was instrumental in preventing a fully-fledged global food crisis, the prospect of higher rice prices could spell potential emergency conditions in already stressed regions," it added.

The survey of over 50 economists from the finance, insurance, professional services and technology industries, as well as international organizations and regional development banks, found that they expect reduced growth, stubbornly high inflation and continuing fall in real wages for the remainder of 2022 and 2023.

An average of seven out of ten economists consider a global recession to be at least "somewhat likely".

Prospects for the global economy have deteriorated further in past few months with expectations for growth pared back across all regions.

Almost nine out of ten of the chief economists expected growth in Europe to be weak in 2023, while moderate growth is expected in the Middle East and North Africa (MENA) region, the US, South Asia and Latin America.

With the exception of China and the MENA region, most of the chief economists surveyed expect high inflation to persist for the remainder of 2022, with expectations somewhat moderating in 2023.

As the high cost of living reverberates around the world, the chief economists were in agreement that wages will fail to keep pace with surging prices in 2022 and 2023, with nine in ten expecting real wages to decline in low-income economies during that period, alongside 80 per cent in high-income economies.

With household purchasing power weakening, the majority of the chief economists expected poverty levels across low-income countries to increase, compared with 60 per cent in high-income countries.

"Growing inequality between and within countries is the ongoing legacy of Covid-19, war and uncoordinated policy action. With inflation soaring and real wages falling, the global cost of living crisis is hitting the most vulnerable hardest, said Saadia Zahidi, Managing Director at the World Economic Forum.

"As policymakers aim to control inflation while minimizing the impact on growth, they will need to ensure specific support to those who need it most. The stakes could not be higher," she added.

The cost of living crisis is driving concerns around energy and food prices, the survey showed.

Many chief economists appeared concerned about the risks of food insecurity in South Asia and Central Asia, while nearly 80 per cent of the respondents expected rising costs to trigger social unrest in low-income countries versus 20 per cent in high-income economies.

The Chief Economists Outlook is a quarterly report that builds on the latest policy developments, consultations and surveys of leading chief economists on the most pressing economic topics.

Published on September 28, 2022