‘Hurricane’: Experts warn global economy facing toughest period in 30 years as recession fears mount

The world economy is facing its toughest time in almost 30 years, with one expert claiming several crucial factors could “derail” financial markets.

A finance expert has issued a grim warning that the world economy is facing one of the toughest periods in 30 years, with another claiming we could be set to face an economic “hurricane”.

According to Bloomberg economist Scott Johnson, the energy crisis caused by the Ukraine war will see growth hit just 2.4 per cent in 2023.

That’s the lowest point in almost three decades, excluding 2009, when the planet was in the grip of the GFC, and 2020, when the Covid pandemic wreaked havoc.

Mr Johnson explained that Europe would go into the new year in recession, while the US would end 2022 in one – although he predicted China’s economy would grow in 2023 thanks largely to the easing of its zero-Covid strategy.

But he’s far from the only expert to see bad news on the horizon, with JPMorgan Chase CEO Jamie Dimon telling CNBC he believed a recession could soon be on the cards for the US, which would then impact the wider world.

Want tips to help manage the rising cost of living? Read Compare Money's guide >

Russian President Vladimir Putin’s Ukraine invasion has caused economic chaos. Picture: Mikhail Metzel/Sputnik/AFP

JPMorgan CEO Jamie Dimon has warned of a possible ‘hurricane’ ahead. Picture: Michel Euler/Pool/AFP

He explained that inflation and interest rate hikes – which Australia is also battling – are “eroding everything”, and that global events including the Ukraine invasion and tension with China had added extra “storm clouds”.

“When you look out forward, those things may well derail the economy and cause this mild to hard recession that people are worried about,” Mr Dimon said.

“It could be a hurricane. We simply don’t know.”

On Tuesday, America’s top bankers shared their sense of anxiety about the state of the economy during an industry conference.

2023 is set to be one of the worst years in decades for the world economy. Picture: iStock

Mr Dimon’s colleague Marianne Lake, co-CEO of the investment banks’s consumer and community banking division, told the conference the company was now bracing for a “modest recession” in the near future.

“The probability of recession has gone up. We’re actually looking for that right now,” she said, while Goldman Sachs chief executive David Solomon said many CEOs were now “extremely cautious” about the economic outlook.

The alarming comments come amid a turbulent time in Australia as well, with the Reserve Bank on Tuesday raising the official cash rate by 0.25 per cent again in December.

In the final decision for 2022, the RBA pushed up rates for the eighth consecutive month, after hikes began in May from a record low of 0.1 per cent.

It means rates have jumped again from 2.85 per cent to 3.1 per cent, which will lift the official cash rate to its highest level in 10 years.

“Inflation in Australia is too high, at 6.9 per cent over the year to October. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role,” RBA governor Philip Lowe said in a statement shortly after the latest hike was announced.

China’s Covid mayhem has also impacted the globe. Picture: Kevin Frayer/Getty Images

“Returning inflation to target requires a more sustainable balance between demand and supply. A further increase in inflation is expected over the months ahead, with inflation forecast to peak at around 8 per cent over the year to the December quarter.

“Another source of uncertainty is the outlook for the global economy, which has deteriorated.”

Dr Lowe added that those “uncertainties” meant there was a range of potential scenarios that could play out in the months ahead, and that “the path to achieving the needed decline in inflation and achieving a soft landing for the economy remains a narrow one”.