- Nomura sees central banks tightening too much

- UK, US, eurozone and Japan to all to catch a cold

- Shallow and long growth decline, analysts predict

Major global economies face being plunged into a full-blown recession later this year, according to analysts at investment bank Nomura.

In a research note to clients, Nomura’s Rob Subbaraman and Si Ying Toh said central banks looking to restore their inflation-control credibility are likely to tighten policy too much, even if that means sacrificing growth, before cutting rates in 2023.

‘Increasing signs that the world economy is entering a synchronised growth slowdown, meaning countries can no longer rely on a rebound in exports for growth, have also prompted us to forecast multiple recessions,’ they wrote.

The analysts believe that ‘consumers are experiencing a sentiment shock’ while commodity price shocks ‘risk becoming the new normal’.


The investment bank expects the UK to get dragged down along with other major economies, including the US,  the eurozone, Japan, South Korea, Australia and Canada, although its analysts predict the depth of recession will vary among nations.

In the US, Nomura forecasts a shallow but long recession of five quarters starting in the final three months of this year. In Europe, the slump could be much deeper if Russia entirely cuts off gas to Europe, the economists said.

Nomura also believes recessions could be worse if there is a significant decline in respective housing markets, with the risk highest for mid-sized economies such as Australia, Canada and South Korea.

However, despite weak sentiment, consumer fundamentals are solid, Nomura believes. ‘Heading into an expected recession, consumer fundamentals remain on historically solid footing,’ wrote the report’s authors Subbaraman and Toh.

‘The household debt to service ratio remains well below its pre-pandemic level, and despite the recent deterioration in stock prices, the wealth to income ratio for households remains elevated. Excess savings have supported consumption in recent months, with the personal saving rate dropping notably below its pre-pandemic average.’


The Nomura analysts see major economies falling into recession in the closing months of this year. ‘Combining the factors above, we expect a modest recession to start in Q4 2022,’ they said.

‘Relative to previous downturns, we expect a shallower and longer path, for three reasons. First, robust consumer balance sheets and excess savings should limit how quickly growth decelerates. Second, the lack of policy support – monetary and fiscal – at the onset of the recession will likely prolong its length. Third, despite some concerns over corporate debt, there is no obvious financial accelerator to amplify the recession shocks like the global financial crisis.’

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Issue Date: 04 Jul 2022