Economist Willem Buiter Predicts 55 Percent Possibility Of Global Recession With Steadily Declining Real GDP Growth

China has been one of the world's leaders in economic growth for so long, but economists are worried about the possibility of the country leading the world into a global recession marked by a decline in real gross domestic product (GDP) growth for two straight quarters.

"We believe that there is a high and rising likelihood of a Chinese, EM (emerging market) and global recession scenario playing out," says Willem Buiter, former member of the Bank of England's interest rate-setting committee and currently the chief global economist of Citigroup. "This is a classic recession scenario."

Global markets have been worried in the past months, fearing a sharp decline in the economy of China - the second largest economy in the world behind U.S. Adding to their concerns is the dollar-denominated exports of China falling by 5.5 percent in August and imports falling by almost 14 percent.

According to CNBC's report on Wednesday, Buiter states that a global recession has not yet reflected on Citigroup's forecasts for 2016 growth, but points out that should a recession occur, a steady decline in GDP in the coming years may be observed dropping at or below 2 percent by mid-2016. However, he says that global recession of any level has only a 55 percent chance of happening.

"We consider China to be at a high and rapidly rising risk of a cyclical hard landing," says the Citi note. "The reasons behind China's downturn and likely recession are familiar from the long history of business cycles everywhere: rising excess capacity in a growing number of sectors, excessive leverage in the private sector and episodes of irrational exuberance in asset markets."

China has set its 2015 GDP target growth rate at seven percent, reporting a 7 percent annualized growth rate in July. But based on the bank's models, Buiter notes a 4 percent growth in China's economy.

"If China does worse, the U.S. and everybody else does worse. It is mitigated somewhat by weaker commodity prices," Buiter states. "Chinese trade as a share for total world trade is larger than that of the U.S."

DNA India noted in a report on Wednesday that Buiter has defined recession as "a period during which the actual unemployment rate is above the natural employment rate or the level of actual GDP is below the level of potential GDP."

"If the Fed and the Bank of England hike rates this year or next year they may, if global recession scenario arises, be cutting rates again during the second half of 2016," concludes Buiter.