AFTF 2022: doom & gloom misplaced

Fears of a deep global recession with damaging consequences are misplaced, according to ANZ’s chief economist.

While a mild recession in some of the world’s key markets seem inevitable, Richard Yetsenga told the ANZ Finance & Treasury Forum in Singapore, such a rest could bring about some “welcome change" – even if it is disruptive for markets.

“This recession will still ultimately be costly for some firms and individuals,” he said. “But rather than being really seriously damaging, I think it’s more like to be a pause that actually refreshes.

“A mild recession will bring some respite to consumers who are facing these really challenging cost-of-living issues.”

Businesses could also see a return of the supply security missing since the pandemic began, Yetsenga said – as well as the end of the ongoing talent war.

“I think [a mild recession] will actually bring some welcome change,” he said.

Yetsenga said recessions are likely in Europe, the United Kingdom and the US, which has “technically had a recession already”, he said.

“[But] we're all worried about something much, much worse than a garden-variety recession,” he said. “I don't think that's what we're going to see. I think those fears are misplaced.”

Supply

Yetsenga acknowledged inflation as the major issue ahead for the economy, but in his optimism, questioned its major driver.

“Much of what you read suggests, assumes, presupposes, claims, and sometimes just plain makes up, that the inflation challenge is primarily due to supply side problems,” he said.

“The implication of that being, ‘look, it's not really anybody's fault, there's not much we can do about it, and the supply-side problems will resolve themselves in time, so there's really no need to panic’.”

For Yetsenga, this thinking doesn’t mesh with data showing global shipping rates are falling, commodity prices declining, and core inflation, rather than headline inflation, driving most of the rise.

“Primarily, I think the world has an excess demand problem and not an insufficient supply problem,” he said.

The ANZ Finance & Treasury forum returned to an in-person event this year for the first time since 2019, attracting 200 guests.  

The forum brought together some of the region’s most compelling thought leaders to discuss how organisations are making the future count together on the path to net-zero carbon.