'Worse damage than the financial crisis in 2008.' Wealthy countries could trigger a global recession, UN says




 

Governments around the world are determined to bring down inflation whatever the cost, but a growing chorus of voices is pointing out that aggressive monetary policies could have some serious and long-lasting consequences on the world economy.

Central banks in the U.S., Europe, and the U.K. have pursued relentless monetary tightening policies this year to reduce domestic inflation, but transnational institutions including the World Trade Organization and the International Monetary Fund have warned that this approach could push the world into a long period of low economic growth and persistently high prices, according to a Monday report.

"The world is headed towards a global recession and prolonged stagnation unless we quickly change the current policy course of monetary and fiscal tightening in advanced economies," the UN Conference on Trade and Development (Unctad) cautioned in an annual global trade forecast report released on Monday.

The report predicted that current monetary policies in wealthy nations could spark an economic downturn worldwide, with growth slipping from 2.5% in 2022 to 2.2% next year. The UN says that such a slowdown would leave global GDP well below its pre-pandemic norm, and cost the world economy around $17 trillion, or 20% of the world's income. And developing nations will be the most negatively impacted, according to the report, and many might be facing a recession worse than any financial crisis in the past 20 years.

"The policy moves that we have seen in advanced economies are affecting economic, social, and climate goals. They are hitting the poorest the hardest," Unctad director Rebeca Grynspan said in a statement accompanying the report's release.

"They could inflict worse damage than the financial crisis in 2008," Grynspan said.

A 'policy-induced' recession

The UN agency made clear it will hold central banks around the world responsible for causing the next global recession.

"Excessive monetary tightening and inadequate financial support" in advanced economies could backfire spectacularly, resulting in high levels of public and private debt in the developing world, the report says.

Rising interest rates and fears of a coming recession have sent the value of the U.S. dollar soaring against all other currencies this year. And while this has been great news for American tourists traveling abroad, it's a fiscal nightmare for developing countries, where import prices are rising fast and servicing dollar-denominated debt is becoming untenably expensive.

Debt levels in emerging markets have been hitting record highs for months, but the strong dollar has exacerbated uneven balances and raised inflation in developing nations as well, according to a separate economic report from the UN published on Monday.

With debt becoming more expensive to service, emerging economies have fewer funds available to invest in health care, climate resilience, and other critical infrastructure, the Unctad report warned, which could lead to a prolonged period of economic stagnation.

"We may be on the edge of a policy-induced global recession," Grynspan said.

The report urged advanced economies to consider ways to reduce inflation other than raising interest rates. Grynspan insisted that inflation in every country today is because of a "distributional crisis," caused by supply-chain bottlenecks unresolved from the pandemic-era, and recommended wealthy nations invest more in developing nations and optimizing supply chains around the world.

Grynspan also called for more debt relief and restructuring packages for emerging economies that are struggling to service their debt.

Unctad joins a growing number of transnational institutions calling on wealthy nations to consider what their efforts to reduce inflation at home is doing to the global economy. Last week, World Bank president David Malpass urged wealthy countries to focus on the supply side of the inflation problem by investing more in production in developing nations and in optimizing supply chains.

This story was originally featured on Fortune.com

COMMENTS

More Related News

Close Yellen adviser Lipton to step down - NYT
Close Yellen adviser Lipton to step down - NYT
  • US
  • 2022-11-30 10:33:17Z

The former International Monetary Fund official has served as international affairs counselor to Yellen for the past two years after he came out of...

IMF
IMF's Georgieva, WTO leader: Don't 'pull the plug' on global trade

IMF Managing Director Kristalina Georgieva told reporters after a meeting with German Chancellor Olaf Scholz that globalization was facing its biggest...

Saudi Arabia extends terms of $5 billion in aid to Egypt
Saudi Arabia extends terms of $5 billion in aid to Egypt
  • World
  • 2022-11-29 15:47:43Z

Saudi Arabia agreed Tuesday to extend the terms of a $5 billion aid package to Egypt in March, Saudi state media said, in a move aimed at bolstering the...

AP Interview: IMF chief urges targeted COVID policy in China
AP Interview: IMF chief urges targeted COVID policy in China
  • World
  • 2022-11-29 12:36:17Z

It is time for China to move away from massive lockdowns and toward a more targeted approach to COVID-19, the head of the International Monetary Fund said...

Leave a Comment

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

Cancel reply

Comments

  • Tbmzro
    (2022-11-03 21:38:13Z)

    order rocaltrol 0.25mg sale calcitriol 0.25mg for sale order calcitriol online cheap

    REPLY
  • Halgwr
    (2022-11-08 10:45:22Z)

    zithromax price cheap prednisolone for sale gabapentin 600mg uk

    REPLY
  • Kcjhuh
    (2022-11-09 13:40:09Z)

    furosemide 100mg pills stromectol for sale stromectol tablets for humans

    REPLY
  • Acaerq
    (2022-11-10 16:54:13Z)

    brand hydroxychloroquine 200mg glucophage 1000mg generic buy stromectol usa

    REPLY
  • Vnwxpj
    (2022-11-11 23:57:41Z)

    cheap atorvastatin viagra price buy sildenafil 100mg online

    REPLY
  • Xmokif
    (2022-11-13 02:41:32Z)

    buy lisinopril 5mg norvasc 5mg uk buy cialis

    REPLY
  • Lnngvm
    (2022-11-14 05:32:35Z)

    lopressor 50mg pill medrol 16 mg for sale medrol australia

    REPLY
  • Riwbwx
    (2022-11-15 08:40:57Z)

    order clomid 50mg sale buy carvedilol pills buy pregabalin generic

    REPLY
  • Mvbyyd
    (2022-11-16 14:21:38Z)

    buy generic aristocort 4mg triamcinolone 4mg brand brand priligy 90mg

    REPLY
  • Qgxtsn
    (2022-11-20 01:46:37Z)

    generic acyclovir 400mg diltiazem 180mg usa allopurinol us

    REPLY
  • Srrlyc
    (2022-11-22 00:20:45Z)

    crestor 10mg cheap crestor online order purchase tetracycline

    REPLY
  • Evzuaw
    (2022-11-23 20:39:36Z)

    baclofen 10mg us baclofen online order cheap sildenafil pill

    REPLY
  • Ckdwxo
    (2022-11-26 01:55:32Z)

    buy cialis sale cialis cost buy toradol online

    REPLY
  • Hcbhyi
    (2022-11-28 08:44:50Z)

    colchicine oral propranolol oral purchase methotrexate online cheap

    REPLY
  • Cbmqyz
    (2022-11-30 09:53:31Z)

    cozaar pill cozaar 25mg without prescription sumatriptan price

    REPLY

Top News: Economy