Repeated shocks, geopolitical tensions, and restrictive monetary and fiscal policy decisions raise the specter of global recession. While not our base case, the occurrence of one extreme event, or even a combination of several smaller unfavorable events, could thrust the world back into recession following the spectacular recovery from the pandemic.

We model plausible scenarios that might lead the global economy, as well as individual economies, including the US, China, and the EU, into recession within the next 18 months. We also consider “stagflation”—a prolonged period of very low growth and high inflation—which on a spectrum of bad events is just as undesirable as recession, if over a prolonged period.

A short period of stagflation, either globally or in select major economies, is of greater likelihood than recession over the next year and a half, a possibility that should still worry business executives.