The world is closing in on a global recession as central banks simultaneously raise interest rates to combat persistent inflation, the World Bank (WB) has warned.
The world’s three largest economies — the United States, China and the euro zone — have slowed sharply and even a “moderate shock to the global economy over the next year could push it into recession,” the bank said in a new study.
He said the global economy is in its steepest slowdown since 1970, following a post-recession recovery, and consumer confidence has fallen more sharply than in the run-up to previous global recessions.
Global growth is slowing sharply and is likely to slow further as more countries fall into recession,” World Bank President David Malpass said, adding concern that these trends will persist, with devastating consequences for economies. from emerging and developing markets.
Synchronized global interest rate increases and related monetary policy actions are likely to continue well into next year; however, they may not be enough to bring inflation back to pre-Covid-19 pandemic levels, the bank warned.
Unless supply disruptions and labor market pressures ease, the global core inflation rate (excluding energy) could remain around 5% in 2023, nearly double the five-year average before the crisis. pandemic.
To reduce inflation, central banks may need to raise interest rates by a further 2 percentage points, on top of the 2 percentage point increase already seen above the 2021 average, he said.
He warned that an increase of that size, coupled with stress in financial markets, would reduce global Gross Domestic Product (GDP) growth to 0.5% in 2023, or a 0.4% contraction in per capita terms, which would meet the technical definition of a global recession.
Malpass said authorities must shift their focus from cutting consumption to boosting production, including efforts to generate additional investment and productivity gains.
Previous recessions showed the risk of allowing inflation to remain high for too long at a time when growth is weak, the World Bank added, noting that the 1982 recession triggered more than 40 debt crises and marked the beginning of a decade of lost growth in many developing economies.
World Bank Vice President Ayhan Kose said a recent tightening of monetary and fiscal policies would help reduce inflation, although the highly synchronous nature of the measures could aggravate the situation and sharpen the slowdown in global growth.
The study suggests that central banks can fight inflation without triggering a global recession by clearly communicating their monetary decisions, while authorities must implement credible medium-term fiscal plans and continue to provide targeted relief to vulnerable households.
There will be more global slowdown in the third quarter: IMF
Downside risks continue to dominate the global economic outlook with some countries expected to slide into recession in 2023, but it is too early to say whether there will be a full blown recession, International Monetary Fund (IMF) spokesman Gerry Rice said.
Rice told reporters that high-frequency data points to a further loss of momentum in the third quarter; however, he did not elaborate on further revisions to the IMF’s outlook.
In July, the IMF revised down global growth to 3.2% in 2022 and 2.9% in 2023. Next month it will publish new forecasts.
“Clearly, what we had characterized as a global economic slowdown has intensified in recent weeks and months,” Rice said at a virtual news conference.
He added that a continued lockdown due to the Covid-19 pandemic and real estate problems are weighing on economic activity in China, while the strengthening of the dollar has implications for many countries. (Reuters)
hartford car insurance shop car insurance best car insurance quotes best online car insurance get auto insurance quotes auto insurance quotes most affordable car insurance car insurance providers car insurance best deals best insurance quotes get car insurance online best comprehensive car insurance best cheap auto insurance auto policy switching car insurance car insurance quotes auto insurance best affordable car insurance online auto insurance quotes az auto insurance commercial auto insurance instant car insurance buy car insurance online best auto insurance companies best car insurance policy best auto insurance vehicle insurance quotes aaa insurance quote auto and home insurance quotes car insurance search best and cheapest car insurance best price car insurance best vehicle insurance aaa car insurance quote find cheap car insurance new car insurance quote auto insurance companies get car insurance quotes best cheap car insurance car insurance policy online new car insurance policy get car insurance car insurance company best cheap insurance car insurance online quote car insurance finder comprehensive insurance quote car insurance quotes near me get insurance