The World Is “On The Edge Of A New Recession. Nations Could Bear The Brunt Of It

According to the UN Conference on Trade and Development (UNCTAD), monetary and fiscal policies in advanced economies — including continued interest rate hikes — could push the world toward a global recession and stagnation.

UNCTAD’s 2022 report says a global log jam might actually cause more terrible damage than the financial crisis in 2008 and the Coronavirus shock in 2020.

“We still have time to step back from the edge of recession. Nothing is inevitable. We must change course,” said UNCTAD Secretary-General Rebeca Grynspan.

Meanwhile, the Unified Countries has shouted out an advance notice that the world is “on the edge of a downturn” and a several developing countries could bear the ‘heat’ more. All regions will be affected, however alerts are ringing most for developing nations, large numbers of which are edging nearer to debt default,” the report said.

Asian and global economies are set out toward a downturn if central banks keep raising interest rates without also using different instruments and seeing stock side financial aspects, the UNCTAD said adding that an ideal delicate landing would be impossible.

“We call then for a more pragmatic policy mix that deploys strategic price controls, windfall taxes, anti-trust measures and tighter regulations on commodity speculation. More pragmatic policy mix is needed. Besides, the world needs to make greater efforts to end commodity price speculation, UNCTAD reveals.

The report further says developing countries are presently supporting developed ones on net,” the report said. Interest rate hikes by advanced economies are hitting the most vulnerable hardest. Some 90 developing countries have seen their currencies weaken against the dollar this year.

East and Southeast Asia are set to post growth rates beneath those in the five years before the pandemic. UNCTAD anticipates that East Asia should develop at 3.3% this year, compared with 6.5% last year.

Expensive imports and a softening in global demand for exports as well as China’s slowdown will also add further pressure on that part of the region, the report said.

Asia may be hit with a recession, and Debt distress is growing in South Asia and western Asia. Sri Lanka has fallen into sovereign default, Afghanistan remains in debt distress, and Turkey and Pakistan face rising bond yields. Pakistan is reeling from the floods, and is already suffering mounting debt and falling foreign reserves.

A new note by Capital Economics on Tuesday echoed the UNCTAD findings.

It said the latest global manufacturing Purchasing Managers’ Index — which measures industrial activity — indicated global industries “have weakened significantly and are set to perform worse in the coming months as high inflation and rising interest rates take their toll.”

The silver lining is that this spare capacity will alleviate global shortages and bear down on price pressures, senior global economists have proclaimed.

Japan Is Reopening Its Border To The Tourism World

This present circumstance is a consequence of the hurry to fix interest rates after years of ultra-low rates with global policy makers failing to lift inflation in that time or to generate healthier economic growth, the UNCTAD added.

“Focusing solely on a monetary policy approach — without addressing supply-side issues in trade, energy and food markets — to the cost-of-living crisis may indeed exacerbate it,” the UNCTAD said.

“Under current supply-chain challenges and rising uncertainty, where monetary policy alone cannot safely lower inflation, pragmatism will need to replace ideological conformity in guiding the next policy moves.”

The UNCTAD suggested that countries look at overdue wage increases and continue to create jobs.

There should also be more public investment in economic and social infrastructure to boost employment, raise productivity, improve energy efficiency and reduce greenhouse-gas emissions.

Governments should consider tax reforms, including more wealth and windfall taxes, a reduction of regressive tax cuts and loopholes and the clamping down of tax havens by firms and high-wealth individuals, the report said.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *