BlackRock predicts an unprecedented recession for 2023

The year 2023 heralds a paradigm shift from an economic point of view, according to the forecasts of BlackRock experts and its vice president Philipp Hildebrand. According to them, the uncertain geopolitical situation combined with the rise in inflation heralds the beginning of a new international economic era.

BlackRock predicts a bleak future

Philipp Hildebrand, vice president of the giant BlackRocksurrounded by a team of senior business executives, warned about the arrival of a new economic era and a total paradigm shift.

“The Great Moderation, the period of four decades of largely stable activity and inflation, is behind us. The new regime, characterized by greater macroeconomic and market volatility, is taking shape. A recession is looming. »

The Great Moderation is the period from the 1980s to the financial crisis in 2008, period when macroeconomic volatility was at its lowest and where all the various important factors such as unemployment, economic growth or inflation have been able to observe a sustained stable level.

Also, as Philipp Hildebrand points out, since 2008 these macroeconomic factors have become unpredictable and inflation can no longer be hidden. Various events, including the war between Russia and Ukraine, only encourage division internationally.

We were able to verify this with suspension of Russian banks from the international SWIFT networkthus encouraging Moscow to approach its Chinese counterparts, among others.

“This is, in our opinion, the most tense global environment since the Second World War. We see geopolitical cooperation and globalization developing into a fragmented world with competing blocs. This is at the expense of economic efficiency. »

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Overall economic growth slowed

According to BlackRock forecasts, Inflation will necessarily be kept above the level that the central banks have set as a target due to the following 3 factors:

  • Population agingwhich will combine the cumulative decline in the available labor force with an increase in the costs associated with the loss of autonomy of the elderly;
  • Geopolitical tensionsas we said earlier, which has already begun to disrupt stable global supply chains;
  • A transition to clean energy which will lead de facto an increase in inflation if it does not occur in the long term.

Additionally, according to the asset management giant, the US Federal Reserve (FED) this time will not be able to block the increase in inflation by simply lowering interest rates, as it has been able to do so far.

“Central bankers will not come to the rescue when growth slows under this new regime, contrary to what investors expected. That is why the old method of ‘buying the dip’ does not apply in this new regime.”

In addition, various signs such as the slowdown in the real estate market (and the overall rise in house prices), the drop in household savings or even a drop in investment by corporate executives, according to the BlackRock teams, warning signs of economic collapse are coming as early as next year.

Wall Street Banks are no more confident: be it Morgan Stanley, Bank of America or even Deutsche Bank, these pillars of the international economy predict a decline in US stocks of around 20% during 2023. According to David Solomon, CEO of Goldman Sachs, there would be only a 35% chance that the recession will be avoided by the US economy next year.

And as for France, the recession is already here : according to the available data, French GDP should fall not only for this last quarter of 2022, but also for the first quarter of 2023. According to forecasts, unemployment should reach 8% and public deficits as well as public debt should also explode.

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Sources: Fortune, Capital

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