![Global economic instability will affect tech sector Global economic instability will affect tech sector](https://varindia.com/storage/news/uploads/2018/02/62adb6f5ea4d8.jpg)
The technical definition of a recession involves a fall in gross domestic product (GDP) over two consecutive quarters and many US business leaders are now predicting recession, seemingly due to the sharp decline in equity prices. The fact is, if business leaders really believe a recession is imminent, perhaps they will cut back on investment spending in a way that suppresses overall economic activity. Psychology matters.
Elon Musk is even more pessimistic than most economists and Wall Street experts. The Tesla CEO said in a May 16 Twitter post the U.S. is probably already in a recession that will last anywhere from 12-to-18 months. There is fear of a recession growing, macroeconomic factors "will affect the tech sector," said Alphabet and Google CEO Sundar Pichai. Google and other major tech players in the U.S. have continued to grow, due to COVID-19 pandemic.
However, supply chain disruptions have cast a shadow over their business and their stock prices have dropped sharply since the start of the year owing to the Russia-Ukraine war, China lockdowns, high inflation and interest rate hikes, resulting in Big Tech stocks nose-diving. Alphabet's stocks are down by 22 per cent this year, as tech companies are battered by the worldwide slump in the markets. "Google definitely sees uncertainty ahead, like everyone else," Pichai was quoted as saying earlier this month.
Snap, the parent company of Snapchat, is also slowing down on hiring this year. Pichai also pointed to the Russian invasion of Ukraine and monetary tightening by central banks around the world as concerns. "Economies tend to have cycles, and the tech industry tends to have more volatile cycles," he said, noting that the industry was bound to be affected somewhat by political and economic instability.
As business conditions worsen, Netflix has announced layoffs and Facebook parent Meta revealed plans to curb investment. Another concern is the accelerating fragmentation of the internet, with China shutting down many services originating in the U.S., and Russia making similar moves after its invasion of Ukraine. Google and others have created services with a billion users worldwide over the past 20 years based on the promise of "one net."
"Countries have to think about what is the best way they can protect the sovereignty of their citizens," Pichai said. "I think it's equally important that countries benefit a lot from being connected to this global economy" through the internet. Pointing to the March agreement between the U.S. and the EU on the transfer of personal data, he added, "I hope there are strong bilateral conversations, as well as multilateral conversations, with these things.
As a company, we are one player in a more complicated ecosystem. But I think we plan to be constructive and engaging." Finally, what is the risk of recession? The reality is that there is a 100% probability of another recession down the road. The question is how soon. Most forecasts, including the experts from Deloitte forecasts, suggest a low probability of a recession this year or even next year.
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