Recession Risk Remains Highest For H1 2023, Unlikely In H2

Despite the banking turmoil in March, which also reached Europe through Credit Suisse, the probability of a recession in 6-months time remained low and well below the benchmark 50%. Given that the estimates were above 50% through H2 2022, the biggest risk of a euro area recession remains in H1 of this year. The IMF doesn’t expect in its April projections that the euro area as a whole will fall into recession but is forecasting negative growth in Germany.

• Our March estimate assumes that annual M3 growth in March remained steady at February’s 2.9% and that the number of unemployed continued to ease at -2.2% y/y.
• The equation from 1985 indicates a 27.5% probability of a recession in September, which was up slightly from February’s 18.7%. This is down from our preliminary estimate at the time of the CS troubles, as markets stabilised following central bank intervention and the announcement that UBS would buy CS.
• The 1998-estimation shows a 30.6% recession probability, down from February’s 43.8%. The downward trend in the 6-month change in the number of unemployed has been putting downward pressure on the recession estimate.
• Econometric estimates are only estimates and not projections.

Source: MNI - Market News/Refinitiv