World Economic Forum
Chief Economists Outlook. May 2023

How do economists assess the recent financial turmoil and its impact on the economy?

World Economic Forum´s survey conducted in March-April 2023, among leading chief economists from both the public and private sectors. According to a significant majority of the surveyed, recent turbulence in the financial sector is not a sign of systemic vulnerability, but further disruption is considered likely this year.

Main findings of the survey are the following:

  • Economic outlook: Most participants believe there won´t be a global recession this year. The most pessimistic growth perspective is in Europe (mostly “moderate” growth is forecasted for this year).

  • Inflation: Three-quarters of the respondent believes the cost of living will continue to be an issue this year due to sticky inflation. The most pessimistic view about inflation is in Europe (90% of the economist believe it will continue to be “high or very high”).

  • Recent banking sector turmoil: Almost 70% of the respondent believe it was an episode “isolated with limited additional impact”, meanwhile 30% believe there are “indicators of systemic vulnerability”. Asked about how bank failures or other serious financial disruptions in 2023 are likely, almost 70% answered “somewhat likely and/or extremely likely”. Another 30% believe it is “neither likely nor unlikely” nor “somewhat unlikely”. 82% believe the recent banking turbulences mean businesses will find bank lending more difficult to secure.

  • Regarding the regulatory response to recent financial disruption, the opinions are split in three: 36% believe that the response to bank's turmoil will be followed by a change to banking regulations both at the national and global levels. Meanwhile, other 36% think it will trigger just regulatory changes at the national level, and 27% believe it will be limited to the steps taken in the immediate aftermath of bank collapses in the US and Switzerland.

  • 80% of the Chief Economist believe the central banks are facing a trade-off between fighting inflation and financial stability. 82% believe that interest rates rise will slow, in the face of financial stability concerns. 76% think the central banks will struggle to bring inflation to their target rates.

    Asked about what the main impact of rising interest rates will be on, the economists answered: “property markets” (67% believe it will have a “significant disruption”), financial business (50%), and global financial markets (36%).

  • Geopolitics: 90% believe that in the next three years is “somewhat or extremely likely” to see a deepen in geoeconomic rivalry or tension.

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