Davos 2023: There will be a shallow recession in H1 2023 for some countries, says SBI chairman

WEF Davos 2023: Though two-thirds of chief economists surveyed by the World Economic Forum (WEF) predict a global recession in 2023, many economists strongly feel that the recession impact could be shallow and affect only a handful of countries. Talking on the sidelines of the WEF annual meet in Davos, Dinesh Kumar Khara, Chairman, State Bank of India, told Business Today that an economic slowdown or recession is clearly seen on the horizon, but it could be restricted only in the first half of 2023, following which robust growth is expected. 

“My assessment after meeting a lot of CEOs around the globe is that recession may hit certain parts of the globe, which will be particularly in the first half of the year 2023. But I am getting positive feedback that the second half of the year will be quite robust. That means some major economies like the US might get into some type of shallow recession, but after that, it would be back in action. I would say it is a promising situation,” said Dinesh Kumar Khara, Chairman, State Bank of India, told Siddharth Zarabi, Business Today TV Managing Editor.  

As per WEF’s report, Chief Economists Outlook: January 2023, there is a “strong consensus” that the prospects for economic growth in 2023 are bleak, especially in Europe and the US. All of the chief economists surveyed expect “weak or very weak” growth in 2023 in Europe, while 91 per cent expect “weak or very weak” growth in the US. 

But the report highlighted that countries like India and Bangladesh can benefit from the global slowdown with the diversification of manufacturing supply chains away from China. 

Talking about India’s economic journey in the next one year, Khara said the impact of a global recession could be nominal in India as compared to other countries.   

“When it comes to domestic demand, the scenario is quite encouraging. Last quarter we saw that the demand was as strong as 10 per cent. I expect a similar trend for the quarter ending December. I think our domestic side is doing pretty well. There is some sluggishness on the export side on account of recession fear and slowdown seen in the developed markets. Once the advanced economies look up as predicted, the export lever will also see positive traction,” said Khara.   

Earlier, in another interaction with BT, International Monetary Fund’s First Deputy Managing Director Gita Gopinath said though many geographies are facing recessionary fears, India is in a relatively bright spot and many countries are looking at India as a favourable investment destination.  

“We have a tough year ahead in 2023. But we certainly are seeing signs of resilience around the world. So, in terms of a global recession, I think we are still a fair bit away from it… there are individual countries that are closer to a recession than others are,” said Gopinath.   

“Compared to other countries, it's relatively a bright spot. So, I think it's in a good place. And importantly, many countries are looking at India (as an) investment destination at this point especially as they try to diversify out of other countries, including China,” she added.