Is recession hitting in 2022?

The Russia and Ukraine war is taking the world towards recession, with the growing impact on food, energy and fertiliser prices, and developing nations among the worst affected. Ukraine and Russia would likely see significant contractions, Europe, and the United States would see slower growth, whereas China will also see relatively sharp slowdown due to Covid, inflation and a pre-existing real estate crisis. So, are we going into recession in 2022?

The increased geopolitical risks induced by the Russian invasion of Ukraine will weigh adversely on global economic conditions throughout 2022. Such effects are estimated in our model to reduce GDP and boost inflation significantly, exacerbating the policy trade-offs facing central banks around the world.

As per the IMF forecasts, global growth in 2022 is at 4.4%, but these projections are being revised downwards due to conflict and the fallout from sanctions. The US economy is likely to slow in 2022 and 2023 but will narrowly avoid a recession as the Federal Reserve implements its rate-tightening plan to curb inflation, as per the International Monetary Fund.

Experts are now forecasting on the type of recession to arrive, whether it’ll be a V-shaped recovery, which is quick, with a sharp decline to a bottom followed by a dramatic rise. In a U-shaped recovery, on the other hand, the economy spends longer at the bottom and then gradually rebounds.

Whereas, a W-recovery is when the economy passes through a recession and into recovery and then immediately enters another recession, and K-shaped means some parts of the economy recover more quickly than others. Whereas the Economists are watching the economy closely and many are boosting their odds of a recession occurring in the near term.

Citigroup, assessing global economic growth over the next 18 months, sees a 50% probability of a global recession happening, while Goldman Sachs has put the odds of a recession for the U.S. in the next year at 30%.

The economy is slowing and it will be uncomfortable over the next 12 to 24 months. Major banks have upgraded their forecasts to reflect the increasing possibility of an economic downturn. Analysts at Goldman Sachs put the probability of a recession over the next year at 30 percent, up from 15 percent. Economists at Bank of America predicted a 40 percent chance of a recession in 2023.

During the recession, these organisations into healthcare, food, consumer staples, and basic transportation are examples of relatively inelastic industries that can perform well in recessions. They may also benefit from being considered essential industries during a public health emergency like the COVID-19 pandemic.