Chief economist and director of Zhixin Investment Lianping
Produced by | Sohu Think Tank
Edited by | Zhong Xinge
Recently, the "2022 Trade and Development Report" released by the United Nations Conference on Trade and Development predicts that the global economy will grow by 2.5% in 2022 and the economic growth rate will slow down to 2.2% in 2023. In addition, International Monetary Fund (IMF) said that the risk of a global recession is rising, and the International Monetary Fund will lower its global GDP growth forecast next week.
Will the global economy face recession? What impact will the global economy fall into a recession have on countries? How do you view the issue of "global competitive interest rate hikes"? In response, Sohu Think Tank talks with Lian Ping, chief economist and director of the Institute of Zhixin Investment.
Lian Ping said that the global economy will face a situation where inflation and recession coexist. He pointed out that global prices continue to rise and it is difficult to see a sharp decline. OPEC+ production cut decision also promotes the high operation of energy prices; at the same time, the continued hike of interest rates in the Federal Reserve has also caused liquidity tightening in the global economy. Therefore, inflation and recession are likely to coexist in 2023.
In the fourth quarter of this year, the European economy is more likely to fall into recession. Lianping said that the inflation level in Europe has risen sharply and the economic growth rate has slowed down significantly. In the future, more EU EU member countries may face negative economic growth. "Once the European economic downturn and recession are finalized, it will bring a drag on the US economy and will have a certain impact on the Japanese economy," said Lian Ping.
Faced with the Fed's multiple rounds of interest rate hikes, Lian Ping said that after five rounds of interest rate hikes, the target interest rate level of US federal funds has reached more than 3%. To achieve the 4.5% target, interest rate hikes still need to be two to three times. He expects that the end of the Fed's interest rate hike may occur at the end of this year or the first quarter next year.
"If inflation eases and economic growth declines significantly, it is very likely that the end of the year will be the end of the Fed's interest rate hike. If inflation does not show a clear turning point and the economy is generally stable, then the end of the Fed's interest rate hike may appear in the first quarter of next year." Lian Ping said.
In response to the global competitive interest rate hike, Lian Ping believes that this meaning is not accurate. He said that some countries have experienced a hike of far exceeding the rate hike of the Federal Reserve, which is to resist the negative pressure brought by the Federal Reserve to the domestic currency and capital markets by a significant interest rate hike, and have to raise interest rates. Therefore, this rate hike has a certain defensive and resistant nature. "There is no competition, and defensive interest rate hikes and resistant interest rate hikes are more accurate."
Lian Ping pointed out that the global economic recession will bring about a series of negative impacts such as investment contraction, trade contraction, demand contraction, and employment difficulties. Faced with the continued downward world economy and the global inflation that has a high fever, enterprises and individuals need to prepare for the future and pay more attention to risk control, manage their assets well, and avoid obvious losses.
The following is a detailed edit of the dialogue content:
Sohu Think Tank: Is the global economy about to face recession? What is the basis for its judgment?
consecutive rounds: At present, the global economy will face a situation where inflation and recession coexist. Currently, global prices continue to operate at high levels, with a high fever that will not recede. It is still difficult to see prices continue to fall sharply in the future. For example, recently, OPEC+ has made a decision to reduce production, which will promote the high operation of energy prices in the future. But at the same time, in order to curb high inflation, the Federal Reserve has carried out strong austerity policies, and continued interest rate hikes and balance sheet tightening has brought liquidity tightening to the global economy.
The pressure to increase significantly in financing costs will inevitably have an adverse impact on economic operation, curbing demand and consumption, and dragging down production investment. Therefore, it is very likely that inflation and recession will exist simultaneously in 2023.
Sohu Think Tank: Which is more likely to fall into recession in Asian economies or European economies?
consecutive draws: From the current perspective, the European economy is more likely to fall into recession in the fourth quarter. Judging from the monthly and quarterly operational conditions, there is a possibility of negative economic growth.
On the one hand, energy prices in Europe are rising; on the other hand, sanctions on Russia are also very unfavorable to Europe itself. In addition, it follows the United States to raise interest rates. Therefore, Europe is the weakest and most difficult economy at present. From the perspective of the world economy, Asia has generally developed steadily, and the United States is operating better than Europe.
European inflation level has risen sharply, and the economic growth rate has slowed down significantly. Some major European economies, such as Germany, have recently seen negative economic growth in the month, and there is a possibility of overall negative growth in the fourth quarter. There is a possibility of negative economic growth in more EU member states in the future.
Therefore, in the short term, Europe is the most likely region to move towards a recession. Once the European economy is downward and recession are finalized, it will at least bring a drag on the US economy and will have a certain impact on the Japanese economy.
Sohu Think Tank: What is the impact of the global economic recession? What impact will Western macro-policy have on developing economies?
continuous flat: If the global economy moves towards recession, it will inevitably bring a series of adverse consequences, such as overall contraction of demand and downward corporate investment. Recently, the growth rate of global trade has been declining rapidly. Judging from my country's export data, there is a significant downward trend, which may be more obvious by the fourth quarter.
Investment contraction, trade contraction, demand contraction, and employment are bound to be difficult. Some countries themselves have serious employment problems. For example, the unemployment rate in European countries continues to be at a high level. The impact of the epidemic coupled with the Russian-Ukrainian conflict and other impacts, the unemployment problem may be even more serious. These are the negative impacts and pressures that will be brought about by the gradual recession of the world economy, which is not good for the economies of all countries.
Sohu Think Tank: Where will the end point of the Federal Reserve's interest rate hike? What impact will a strong dollar have on non-dollar countries and global markets?
consecutive set: The Federal Reserve's target interest rate level for federal funds is around 4.5%. From this perspective, the end point of the Federal Reserve's interest rate hike may be at the end of the year or the first quarter of next year. Because after five rounds of interest rate hikes, the target interest rate of the United States' federal funds has reached more than 3%, and has raised interest rates by 300 basis points. If it wants to reach the level of around 4.5%, it may have to raise interest rates two to three times. It may raise interest rates twice in the fourth quarter of this year. Whether interest rates will be raised in the first quarter of next year mainly depends on the operating conditions of US prices, inflation levels, and whether US economic growth will decline significantly in the fourth quarter.
If inflation eases and economic growth declines significantly, it is very likely that the end of the Fed's interest rate hike at the end of the year. If inflation does not show a clear turning point and the economy is generally stable, then the end point of the Fed's interest rate hike may appear in the first quarter of next year. The spillover risk brought by the strong US dollar to non-US dollar countries and global markets can be clearly felt. As the dollar index rises rapidly, the US dollar interest rate has risen significantly, and the interest rate spread between US dollar assets and other non-US dollar assets has been significantly widening. Because the Federal Reserve has continuously issued US dollars to the world for a long time, the US dollar is highly prevalent around the world. When the interest rate spread and investment returns gap significantly increase, the dollar reserves of many countries continue to decrease, bringing huge pressure on the currency depreciation of non-USD countries and the capital market.
This is the most serious challenge facing many countries at present, especially those countries whose economic cycle is contrary to the United States. The inflation of the United States and Western countries is currently at a high level, and economic growth remains restored. However, some countries have not had high inflation levels and relatively low economic growth rates. These countries that require loose monetary policy may face greater challenges.
Sohu Think Tank: How do you view the global "competitive interest rate hike" issue?
Lianping: Regarding the issue of global competitive interest rate hikes, I personally believe that the statements of defensive interest rate hikes and resistant interest rate hikes may be more accurate. After the Fed rate hike, some countries, including some developing countries in , have indeed experienced interest rate hikes that far exceed the Fed rate hike. This rate hike seems to have a certain competitive meaning.But I think the purpose is to defend or resist the huge impact and negative pressure caused by the Fed's sharp interest rate hikes. In fact, they do not need to raise interest rates, but there is no way. Because if the interest rate hike is not followed, capital will flow out on a large scale and the local currency will depreciate significantly. Therefore, interest rate hikes in non-USD countries are defensive and resistant.
Sohu Think Tank: How should enterprises, individuals, and governments respond to the economic recession?
Continuous Ping: Faced with the continued downward world economy and global inflation that is not regressing, enterprises and individuals need to prepare for the future, reduce risk preferences , and pay more attention to risk control.
The economic growth rate is declining, global demand has contracted significantly, trade has declined, investment has declined, etc. In this case, my country's exports are bound to be under pressure. Therefore, for export companies, in the fourth quarter of 2022 and 2023, they should pay close attention to exports and take a series of measures to respond to them.
But at the same time, we should also pay attention to the opportunities therein, because Europe and the United States are facing high inflation pressure, with a sharp rise in costs and high labor wages, which may put their manufacturing production in difficulties and market supply will be insufficient. At this time, my country's exports may usher in some opportunities, which need to be grasped actively and promptly.
For individual investors, in the future, we need to reduce risk preferences and manage risks carefully, especially in overseas investment, we need to pay close attention to risks.
END
Operational Editor: Zhang Yi
