There’s an “uncomfortably high” chance that a recession could hit the global economy in the near future, according to Mark Zandi, chief economist of Moody’s Analytics. Policymakers may not be able to reverse that course, he said.
“I think risks are awfully high that if something doesn’t stick to script then we do have a recession,” Zandi told CNBC. “I’ll say this also: Even if we don’t have a recession over the next 12-18 months, I think it’s pretty clear that we’re going to have a much weaker economy.”
The economist said there are many factors which could help avoid a slowdown in economic activity; these include US President Donald Trump not escalating the trade war with China, the UK finding a resolution to Brexit, and central banks continuing their monetary stimulus.
When asked about the chances of a global economic recession, he said: “I think high, uncomfortably high.”
Zandi’s warnings come as the International Monetary Fund (IMF) makes a downward revision of global growth.
In its World Economic Outlook report, the IMF said the global economy was growing at its slowest pace since the financial crisis. The fund projected global GDP growth of 3% this year, down from its July forecast of 3.2% and a sharp slowdown from just two years ago.
The IMF blamed the slowdown on trade conflicts, Brexit uncertainty, and other geopolitical crises. It has said there’s an “urgent” need for leaders to de-escalate tensions, adding: “Monetary policy cannot be the only game in town and should be coupled with fiscal support where fiscal space is available and where policy is not already too expansionary.”
Zandi agreed that governments should increase spending to support the economy, noting, however, that many major economies would not go down that route.