Will 2023 see an economic recession?

Fears have increased significantly with the escalation of expectations by economic experts and analysts of a possible economic recession in 2023, the global economy in 2022 witnessed a difficult period in which it was severely affected by the repercussions resulting from the outbreak of the Covid-19 pandemic and the global lockdown measures associated with it, in addition to the global geopolitical and economic tensions that resulted from the conflict between Russia and Ukraine and the subsequent repercussions, first let us explain to you what the economic recession is and what it indicates.
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What is an economic recession?

A recession is a significant contraction in economic activity that may last for months or even years, and the economy usually stagnates when a country’s economy suffers from a negative GDP, leading to high unemployment rates, lower spending and shrinking income and manufacturing measures for a period of time (approximately two consecutive quarters of the year). Economic recessions are an inevitable part of the economic cycle within the regular pace of expansion and contraction of the country’s economy.

What are the causes of economic recession?

• Excessive debt
When individuals and companies exceed debt loading limits, these behaviors can cause debt servicing costs to increase to the point where they cannot repay their financial dues. In some cases, it can even amount to default, increasing the likelihood of a major economic crisis.

An example of this type of excess debt, which exacerbated economic conditions, is what happened during the period known as the Great Recession and the global financial crisis in the period 2007-200 Bud, where this crisis began in the United States of America and its effects spread to the rest of the world, especially countries whose economies are directly linked to the American economy, such as European, Asian, Gulf and developing countries, This crisis has caused an increase in the accumulation of mortgage debt and negatively affected the housing sector, complicating financial and economic conditions around the world.

• Inflation
Inflation is the continuous upward trend of prices over time, and inflation itself is not a bad thing, but hyperinflation is a dangerous phenomenon, and central banks control inflation by raising interest rates in the meantime, rising interest rates limit economic activity due to high borrowing costs to establish new projects or expand existing ones.

Perhaps what we are witnessing today of hyperinflation is the largest in decades, which was caused by many events such as the repercussions of the Corona pandemic, the Russian-Ukrainian war and the concomitant energy and food crises, which led global central banks to raise interest rates to record levels unprecedented in a long time, one of the most important signs of the possibility of a global economic recession in 2023.\

• Financial downturn
While inflation may lead to the possibility of an economic recession, the recession that an economic downturn could cause is worse and more serious.
When prices fall over time, deflation occurs, and whenever wages fall, this leads to more price declines until deflation levels get out of control and people and institutions stop spending, undermining the economy, while central banks and economists lack the means to solve the problems that cause deflation, and Japan has experienced major conflicts with deflation in the nineties of the last century that led to a severe recession.

Will 2023 see an economic recession?

Most economists expect that there is a possibility of a recession in 2023, as a result of the accumulation of reasons that may lead to this economic situation, these expectations come as a result of the effects of a difficult year experienced by the global economy, as high inflation that lasted for many decades affected the decline in spending rates after the global lockdown period, As a result of this situation, central banks were forced to increase interest rates and thus raise borrowing costs to unprecedented levels to control the situation, and although experts predict a recession, there are differing views on the extent and severity of this recession. This is due to the complexities of the various factors that affect the economy, which make it difficult to accurately determine the beginning and end of a recession. Multiple sectors and various tools moving within the economy are a reason for the difficulty of predicting recessions accurately, which makes it difficult to predict the occurrence and severity of recessions, as these periods may often come suddenly and surprise everyone. We conclude from this that the conditions are very favorable for a global economic recession, as many causes and factors that may lead to a recession are combined, yet all possibilities may dissipate if governments resort to rational economic policies to address existing economic problems in addition to resolving ongoing military and political conflicts, which will have a great impact on ending many crises and on the recovery of the global economy.
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