World may face recession next year

In its new report, the World Bank has said that the world could face a recession next year amid simultaneous tightening of monetary policy by central banks around the world as several indicators of global recessions can be seen.

The global interest rate hikes by central banks could reach 4%, double than that in 2021, just to keep core inflation at 5% levels. Whether it’s the US or Europe or it is India, countries are aggressively raising lending rates, which aim to control the supply of cheap money, helping in bringing down inflation.

The latest World Bank report underlines that merely raising interest rates may not be adequate to cool inflation emanating from supply constraints and countries should focus on boosting the availability of goods.

World Bank President David Malpass said, “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 market and developing economies.”

The world is facing record inflation due to factors including the Ukraine war that has decreased food supplies, knock-on effects of the pandemic on supply chains, poor demand in China due to its persistent Covid lockdowns, and extreme weather that has upended forecasts of agricultural output.