REUTERS
In an analysis published late on Tuesday, Citigroup Inc. said there is a 55% chance of some form of global recession in the next couple of years, most likely one of moderate depth and length, Bloomberg reported.
"The world appears to be at material and rising risk of entering a recession, led by Emerging Markets (EMs) and in particular by China," bank's chief economist William Buiter wrote.
According to Buiter, the depth and length of the recession will be moderate, in contrast to 2009, when the global GDP fell by 2.1% (World Bank). Buiter defines a global recession as slowing of global GDP growth to 2% or less.
Unlike the U.S.-driven international slumps of the past two decades, this one will be generated by sliding demand from EMs, especially China, which has surged in size to become the world's No. 2 economy.
Other emerging markets such as Brazil, South Africa and Russia are already in trouble while developed economies are still lackluster. Commodity prices, trade and inflation remain sluggish and corporate earnings are slowing, according to the report.
While he said there is unlikely to be a repeat of the 2008 financial crisis of a Depression-like decline in global gross domestic product, he warned the outlook would worsen if investors suddenly panic about mounting public debts or if politicians lapse into protectionism or currency devaluations.
"Economists seldom call recessions, downturn, recoveries or periods of boom, unless they are staring them in the face," Buiter said.
"We believe this may be one of those times," he writes.