In emerging economies, weaker external demand and dollar strength will weigh on growth, foreign brokerage Credit Suisse said in a report.
Inflation has likely peaked in most emerging economies, but central banks should continue hiking at least through the end of 2022, the report said.
"Overall, the economic environment for risk assets is deteriorating. Stagnating global industrial production, persistent cost pressures, and rising financing costs all suggest a prolonged period of low risk appetite," Credit Suisse said.
"High inflation and tight labour markets lead us to raise our forecasts for interest rates significantly higher. Global central banks are now hiking at the fastest pace since 1979. We see little prospect for any pivots toward easing. We have cut our GDP growth forecasts. More tightening, rising real yields, energy price shocks in Europe, and China's ongoing property market stress and Covid lockdowns have led us to cut our GDP growth forecasts," Credit Suisse said.
Global GDP is set to grow 2.6 per cent in 2022 and just 1.6 per cent in 2023. The US has entered a prolonged period of below-trend growth.
"A recession is not our base case, but the probability is rising. Tighter financial conditions are causing cyclical spending to contract. However, healthy household and business balance sheets provide a buffer. The Fed is expected to continue to tighten aggressively to a terminal rate of 4.5-4.75 per cent.
"The Euro area and the UK are already in recession. Recent fiscal measures should mitigate the depth of the downturn from the energy shock. However, inflation is broadening and FX weakness adds to price pressures, so monetary policy will continue to tighten aggressively. We forecast the ECB to hike to 3 per cent and the BoE to hike to 4.5 per cent by early 2023," it added.
"China is in a growth recession. Lockdown disruptions, low pass-through from infrastructure stimulus, and insufficient support to the real estate sector have led us to cut our GDP growth estimate for this year to 3.5 per cent," the report said.