Forecast: Economic Gloom

The World Bank is warning that the global economy is likely to experience one of its sharpest decelerations since World War II as it enters “what could become a protracted period of feeble growth and elevated inflation.” A major lender to developing nations, the World Bank in its Global Economic Prospects report points to the Russian invasion of Ukraine, lockdowns in China, and continuing supply chain disruptions resulting from the COVID-19 pandemic. These storm clouds are “hammering  growth,” said World Bank President David Malpass. “For many countries, recession will be hard to avoid.”

The report comes shortly after the European Union slashed its forecast for economic growth and raised its inflation expectations.

Worries about a stagnating economy at a time of rising prices—known as stagflation—have punished stock market investors this year, particularly holders of technology stocks, many of which have fallen into a bear market, defined as a loss of more than 20 percent.  These conditions have increased the attractiveness of gold, the ultimate safe haven during times of economic stress.

Jamie Dimon, CEO of JPMorgan Chase, the nation’s largest bank, recently warned a conference of financial analysts and investors that severe economic storm clouds are on the horizon. “That hurricane is right out there, down the road, coming our way,” Dimon said, adding that his bank is being very conservative in its lending and investment policies and warning investors to do the same. “You’d better brace yourself.” 

Many corporate executives agree. A recent CNBC poll of corporate chief financial officers found a strong majority believe a recession will hit the economy during the first half of 2023.

The Atlanta Federal Reserve’s GDPNow tracker in early June predicted anemic growth for the second quarter. If gross domestic product were to shrink in the second quarter, the technical definition of a recession would be met, following the 1.5 percent decline in GDP of the first quarter.