WB warns of rising recession risk amid higher interest rates

[HAIDER]

WB warns of rising recession risk amid higher interest rates​

AFP Published September 16, 2022 Updated 42 minutes ago




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WASHINGTON: The threat of a global recession is growing as central banks focus on bringing down soaring inflation rates, the World Bank warned on Thursday, calling on governments to help boost supply to ease the constraints behind rising prices.
Inflation worldwide has been rising at the fastest pace seen in decades, due to supply constraints amid high demand as countries emerged from the pandemic. It has been exacerbated this year by the Russian invasion of Ukraine and Covid lockdowns in China.
Major central banks have responded forcefully, raising borrowing costs to cool demand and douse red-hot inflation.
But in a new paper, World Bank economists warned that the actions may not be enough to bring high prices under control, leading to a need for more interest rate hikes, which in turn will put the brakes on growth.
Many countries will not be able to avoid a recession, but the worldwide slowdown and tightening monetary policy “could give rise to significant financial stress and trigger a global recession in 2023,” the paper said.
In that scenario, global GDP growth would slow to 0.5pc in 2023 -- a 0.4pc contraction in per capita growth, meeting the technical definition of a global recession.
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession,” World Bank President David Malpass said in a statement.
“My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market and developing economies.” He urged policymakers to “shift their focus from reducing consumption to boosting production.” The World Bank in early June slashed its forecast for global growth to 2.9 percent, more than a full point lower than the estimate in January.
Not all doom and gloom
Indermit Gill, the newly installed chief economist at the Washington-based development lender, said his biggest concern is that because of the slowdown and pandemic crisis, “poverty reduction has stopped.” But he expressed some optimism as well.
“It’s not an all doom and gloom story,” he told reporters, noting that because of work done to improve economic policies and management before the pandemic, countries are better able to protect the poor.
“I have the feeling that we will come out on the right side of this because the world has changed now and you know, there’s a lot more capability around,” he said.
The worst case scenario described in the paper Thursday would entail a recession in advanced economies and sharp declines in growth in emerging and developing economies.
“The global economy is now in its steepest slowdown following a post-recession recovery since 1970,” the World Bank said.
“Under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession. “
Published in Dawn, September 16th, 2022

 

[MH.Yang]

The benchmark interest rate on housing loans in the United States has reached 6%. If this number continues, more and more people will default on their housing loans. The interest rate of US government bonds has reached 3.41%, more than double the 1.51% in 2021. It has far exceeded the expected economic growth rate of the United States. The mortgage interest rate exceeded 6%, which was the figure of the economic crisis in 2008. So we give up the fluke mentality, and the global economic crisis is bound to come.

 

[nahtanbob]

The benchmark interest rate on housing loans in the United States has reached 6%. If this number continues, more and more people will default on their housing loans. The interest rate of US government bonds has reached 3.41%, more than double the 1.51% in 2021. It has far exceeded the expected economic growth rate of the United States. The mortgage interest rate exceeded 6%, which was the figure of the economic crisis in 2008. So we give up the fluke mentality, and the global economic crisis is bound to come.

why is a recession automatically a global economic crisis ?

 

[MH.Yang]

why is a recession automatically a global economic crisis ?

The current situation of China's economy is affected by frequent closures of cities, and there is no strength to drive global economic growth. If there is a long-term recession in the US economy at this time, the economic crisis will inevitably sweep the world.

 

[nahtanbob]

The current situation of China's economy is affected by frequent closures of cities, and there is no strength to drive global economic growth. If there is a long-term recession in the US economy at this time, the economic crisis will inevitably sweep the world.

China's Covid problem should be solved the moment zero covid policy is ditched. With the Pfizer vaccines Covid was just fever for a couple of days. If I was a Chinese citizen I would get Pfizer vaccine and move on with my life

 

[MH.Yang]

China's Covid problem should be solved the moment zero covid policy is ditched. With the Pfizer vaccines Covid was just fever for a couple of days. If I was a Chinese citizen I would get Pfizer vaccine and move on with my life

China's traditional culture does not allow China to give up the "zero clearing policy".

So we can be sure that in this economic recession, China is temporarily unable to contribute to the world economic recovery as it did in 2008. If the USA also falls into a long-term recession, the global economic crisis will inevitably erupt.

China and the USA are the two largest markets in the world. Their recession means that the trade and investment of other countries have dropped sharply, leading to a large number of bankruptcies and reneges. In such a difficult situation, few countries can escape such a crisis.

 

[nahtanbob]

China's traditional culture does not allow China to give up the "zero clearing policy".

So we can be sure that in this economic recession, China is temporarily unable to contribute to the world economic recovery as it did in 2008. If the USA also falls into a long-term recession, the global economic crisis will inevitably erupt.

China and the USA are the two largest markets in the world. Their recession means that the trade and investment of other countries have dropped sharply, leading to a large number of bankruptcies and reneges. In such a difficult situation, few countries can escape such a crisis.

I might be missing something. People die all the time. I do not understand why this is a sensitive issue. The mortality rates have fallen due to Covid for vaccinated population.

USA can handle economic downturns. We do not have how Chinese people will react to an economic downturn. The CCP elite will have that on their minds when they make policy