According to the latest forecast from the World Bank, the global economy is very close to falling into recession. The forecast was based on many factors like covid-19 pandemic and the invasion of Russia on Ukraine.
It was predicted in June that the world economy will increase by 3% but the latest forecast based on the current circumstances predicts otherwise. It is expected that the global economy will only grow by 1.7% this year.
The last global recession observed by the whole world was in the 1930s. If the world is going to face another recession this year as predicted then it would be the second Global recession within one decade.
As a result of the global recession, the growth of people through their earnings will be much slower than what is achieved post-pandemic. According to David Malpass, the president of the World Bank, the effects of the recession will be broad-based.
If we ignore the recessions of 2009 and 2020 which were caused by worldwide financial crises and the Covid pandemic then since 1991, the expected 1.7% growth figure will be the shallowest growth in the economy.
The top three dominant giants of the world’s economic growth according to the World Bank are facing a very prominent period of weakness. These three powerful parts, the US, China, and the Eurozone are all facing a downturn that is intensifying the difficulties of the impoverished countries.
The post-pandemic period of 2021 witnessed surging growth in the economy which reached a maximum of 5.3%. But even the most powerful and richest countries will face a sharp downturn of 0.5% from 2.5%.
“Over the past two decades, slowdowns of this scale have foreshadowed a global recession,” the bank alerted, adding that it foresaw “a sharp, long-lasting slowdown”.
The higher inflation rate is the main culprit to shake even the strongest economies of the world. The prices of energy and food hiked worldwide and the main reason was the war between Russia and Ukraine. As it led the West away from the fossil fuels of Russia thus reducing the supplies of crops.
Hopefully, the pressure will ease, and the pace of global price rise is likely to slow down to 5.2% from 7.6% in 2022 according to the World Bank.
The bank further added that it is expected that the global production of energy will increase which will reduce the pressure on its rates. Furthermore, there will be less demand in Europe because an energy crisis has reduced the strain on gas. After all, many businesses and households moved away from it.
Other than energy, crop prices will also be reduced by 5%. Although compared to the past, it is still higher because it is already increased by 13% in 2022.
Higher interest rates are also a considerable culprit. Negating its effects is one of the biggest challenges that is faced by policymakers.
The World Bank accepts that the global economy is under great pressure but the correct policies of governments can relieve this pressure. It further addresses the need to take steps to boost investments and jobs. It also emphasized the importance of international trade and to ease the poorer countries from their debts.
World Bank, Russia-Ukraine war, inflation, global trade, recession, Covid-19 pandemic