World Bank Warns Of Global Recession Next Year As Central Banks Hike Interest Rate To Address Inflation

Global Recession Latest Update: Giving details, David Malpass President of World Bank Group said that global growth is slowing sharply, with further slowing likely as more countries fall into recession.

Global Recession Latest Update: World Bank on Friday warned of global recession next year as several central banks across the world are simultaneously hiking interest rates in response to inflation, it said, adding that a string of financial crises in emerging markets and developing economies would do lasting harm. The World Bank in a report said the central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decades, a trend that is likely to continue well into next year, according to news agency ANI report.

The report by the World Bank further noted, “yet the currently expected trajectory of interest-rate increases and other policy actions may not be sufficient to bring global inflation back down to levels seen before the pandemic. Investors expect central banks to raise global monetary-policy rates to almost 4% through 2023–an increase of more than 2 percentage points over their 2021 average.”

The World Bank report also highlighted that unless supply disruptions and labour-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about 5% in 2023–nearly double the five-year average before the pandemic, adding that central banks may need to raise interest rates by an additional 2 percentage points to control inflation.

Giving details, David Malpass President of World Bank Group said that global growth is slowing sharply, with further slowing likely as more countries fall into recession.

“My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging markets and developing economies,” he added.

Malpass further said, “to achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production. Policies should seek to generate additional investment and improve productivity and capital allocation, which are critical for growth and poverty reduction.”

However, the World Bank clarified that several historical indicators of global recession are already flashing warnings and the global economy is now in its steepest slowdown following a post-recession recovery since 1970.