Economists Predict Impending Recession in 2023
The latest economic policy survey conducted by the National Association of Business Economics (NABE) suggests that a recession is likely to happen in 2023, as predicted by a majority of its 217 members. The NABE Policy Survey Chair, Mervin Jebaraj, revealed that more than two-thirds of the panelists are not confident that the Federal Reserve will be able to bring inflation down to its 2% goal within the next two years without inducing a recession.
According to the survey report, 71% of the respondents believe that tighter monetary policy would be the most instrumental factor in bringing down inflation, followed by lower commodity prices, supply-chain realignments, and weaker output growth. Higher productivity growth and a stronger US dollar are less widely seen as instrumental.
The Fed has been clear about its intention to reach the 2% inflation goal and has been keeping interest rates high to put pressure on the economy. However, if CPI remains above 4%, the likelihood of the Fed pulling back on increased rates seems slim to none. The longer the higher pressure is in place, the greater the chance that the economy might slip beyond the central bank's ability to stop or even reverse interest rate hikes.
In terms of current fiscal policy, about 53% of the respondents think that it is too stimulative, while 41% found it to be "about right," and only 5% thought it to be too restrictive. Fiscal policy is beyond the control of the Fed and is squarely in the hands of the legislative and executive branches.
The survey also revealed that 5% of the respondents think that the country is currently in a recession, compared to 19% last August. About 16% expect that a recession will start in the second quarter of 2023, while 24% predict it in Q3 and 13% point to Q4. Furthermore, 12% said that a recession would start in the first half of 2024, and 22% said the second half of next year.
The NABE survey results are significant because they indicate a general consensus among economists about the potential for a recession in 2023. While the exact timing and severity of the recession are impossible to predict, the fact that a majority of the panelists believe that it will happen is a cause for concern.
Finally, it is critical to monitor the state of the economy in the coming months and years. While the survey results are not a crystal ball, they do indicate that policymakers and business leaders should take steps to prepare for a possible economic downturn in 2023. It may be possible to lessen the severity of a recession and help the economy recover more quickly by taking proactive measures to mitigate its impact.