Global recession risk up on rate hikes: World Bank


NEW DELHI: The world may be edging towards a global recession in 2023 and a string of financial crises in emerging markets and developing economies that would do them lasting harm as central banks globally hike interest rates to combat surging inflation, a World Bank study showed.
“If the degree of global monetary policy tightening currently anticipated by markets is not enough to lower inflation to targets, experience from past global recessions suggests that the requisite additional tightening could give rise to significant financial stress and trigger a global recession in 2023,” according to the study.
“This would entail a recession in advanced economies within the range of the contractions that occurred in the past five global recessions,” it said.
Central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decade-s—a trend that is likely to continue well into next year, the report said.
It said the currently expected trajectory of interest rate increases and other policy actions may not be sufficient to bring global inflation 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 report added.





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