Rising Risk of Worldwide Recession
The global economy is in dire straits. Hard times are ahead, especially in countries where the poorest are already living on the edge. God promises to always provide for His people. Share a prayer of faith in the comments.
From The Wall Street Journal. Policy makers around the world see rising risks that the global economic slowdown could turn into a steeper slump due to strong inflation, high energy costs and climbing interest rates.
Another bad U.S. inflation report last week is likely to keep the Federal Reserve lifting interest rates at a rapid clip. That could help spur the U.S. dollar higher, further elevating the cost of imports and debt service for many countries. Key energy producers are crimping supply, feeding price pressures and slowing economic activity, particularly in Europe. New data from China showed consumer spending falling sharply, another sign of cooling economic growth.
“The worst is yet to come,” said International Monetary Fund Managing Director Kristalina Georgieva at a Thursday briefing, as finance officials gathered in Washington for meetings hosted by the IMF and the World Bank. “Across many economies, recession risks are rising.”
Economies representing more than a third of global output will contract next year, while the world’s three largest economies—the U.S., the European Union and China—will essentially stall, the IMF forecasts. Overall, the fund projects 2.7% growth in 2023, down from 3.2% this year.
“The situation is worse than during Covid-19,” Mohamed Maait, the Egyptian finance minister, said Wednesday on a panel hosted by the Center for Global Development.
Many of the policy makers at the meetings see high U.S. inflation and the Fed’s response as a central threat to their own economic prospects. …
The Fed’s rapid rate increases this year have helped draw investors into U.S. markets and pushed up the value of the dollar. A stronger greenback increases the costs of dollar-denominated imports and debt service for many other countries. It also puts pressure on other central banks to raise their own interest rates to protect their currencies, possibly further slowing growth. …
The U.S. economy’s momentum worries other countries because it gives the Fed latitude to raise interest rates even more, Sri Mulyani Indrawati, the finance minister of Indonesia, said in an interview.
A weakening global economy, high interest rates and a strong dollar “really can hurt all countries in the world,” Mrs. Sri Mulyani said.
“A global recession is very possible,” she said. …
Meanwhile, the Organization of the Petroleum Exporting Countries and its Russia-led allies recently announced a major production cut, which raised oil prices. The International Energy Agency warned Thursday the decision could be a tipping point for the global economy to enter a recession.
There is no official definition of a global recession, but many economists say one essential element is economic growth falling below population growth, or roughly 1.1%. The World Bank forecasts global growth of 1.9% next year.
“That’s dangerously close to a world recession,” said David Malpass, World Bank Group president. …
All the risks to growth could be particularly painful for middle- and low-income countries. Roughly 60% of the world’s poorest nations are in or at risk of debt stress—unable to meet their financial obligations—and many are struggling with higher costs of imported food and energy, according to the IMF.
“The sense that one gets from the meetings is that uncertainty is so high, it’s difficult to see light at the end of the tunnel,” José de Lima Massano, governor of the National Bank of Angola, said in an interview.
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(Excerpt from The Wall Street Journal. Photo Credit: Canva)
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