Citi Sees 55% Chance Of Global Recession

• Citi’s Global Economics Team sees a 55 percent chance of a global recession in the next couple of years
• Recessions are a normal part of capitalist market cycles
• Although Citi expects the next recession to be moderate, emerging market financial crises and/or global protectionism could make it much worse

According to Citi analyst Willem Buiter, a global recession is now the most likely outcome for world economies in the next few years. In a new report, Buiter discusses what Citi’s Global Economics team sees on the horizon.

What are the chances?
Citi sees a 40 percent chance that global real GDP growth rates will decline steadily from now until 2017, resulting in a moderate recession. In addition, the firm sees a 30 percent chance that the global economy will avoid recession and maintain current growth rates, a 15 percent chance of a severe recession and financial crisis and a 15 percent chance of a global economic boob over the next couple of years.

“In our view, the probability of some kind of recession, moderate or severe, is therefore 55%,” Buiter explains.

Comes with the territory
Buiter notes that the next recession should come as no surprise and will likely not cause any major long-term damage to global economies. “Capitalism is cyclical – and always has been. It is likely that this recession will be shallower than the last one.”

Risks remain
Although Buiter believes the next recession will likely be a run-of-the-mill moderate downturn in the global economic cycle, he mentions several unknowns that could end up making it much more severe.


“If protectionist measures other than competitive devaluations are resorted to [to] support and boost national economic activity, things could get much worse and stay that way for much longer,” he cautions.

In addition to global protectionism, he also sees potential financial crises in emerging markets resulting from uncontrolled deleveraging as another concern that could make the impact of a recession much more severe.