Global investment bank Goldman Sachs and JPMorgan predict an imminent recession in the eurozone. “Risks to our outlook tilt toward a sharper recession in the event of a more severe disruption to gas flows, a renewed period of sovereign stress or a US recession,” Goldman Sachs economists said.
Goldman Sachs Predictions
Two major global investment banks, Goldman Sachs and JPMorgan, released reports on Wednesday, independently predicting an imminent recession in the eurozone.
Goldman Sachs analysts, led by Chief European Economist Gary Stein, expect a recession in the eurozone in the second half of this year that will last until the end of the year. They also expect a contraction of 0.1% in the third quarter and 0.2% in the fourth, and they expect growth to return in 2023.
“Looking at the countries, we find Germany and Italy clearly in recession in the second half, while Spain and France continue to grow,” Goldman Sachs economists said in detail, explaining:
Risks to our outlook tilt toward a more severe recession in the event of a more severe disruption to gas flows, a renewed period of sovereign stress or a US recession.
Economists have highlighted some of the causes of the downturn, including a looming gas crisis and political problems in Italy that may delay the disbursement of EU aid.
JP Morgan forecast
In a note published on Wednesday, JPMorgan warned that the eurozone will be in a mild recession by early next year. Economists at the bank lowered their economic forecasts. They now expect eurozone GDP to grow by 0.5% this quarter, followed by a 0.5% contraction in both the fourth quarter of this year and the first quarter of next year.
JPMorgan analysts added:
We expect the European Central Bank [European Central Bank] To deliver another 50 basis points of gains by the end of the year.
The bank’s analysts cut their previous forecast at 75 basis points in three installments. They are now forecasting 25 basis points in both September and October.
The two global investment banks’ forecasts for a recession follow a warning on Tuesday from the International Monetary Fund that both Europe and the United States will see virtually no growth next year if Russia completely cuts off Europe’s gas supplies and cuts its oil exports.
Meanwhile, the US economy contracted from April to June for the second consecutive quarter. The Bureau of Economic Analysis reported Thursday that the country’s gross domestic product fell 0.9% at an annualized pace for the period. However, President Joe Biden has repeatedly dismissed recession fears. In addition, Treasury Secretary Janet Yellen He said Thursday that the US economy is going through a transition, not a recession.
What do you think of the predictions of Goldman Sachs and JP Morgan? Let us know in the comments section below.
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