You can add the World Bank to the growing heart that sounds like recession alarms. In his latest outlook, World Bank President David Malpass said that “for many countries, the recession will be difficult to avoid.”
Malpass joins many others on Wall Street and central banks around the world who are beginning to warn of a severe economic downturn.
JPMorgan Chase CEO Jamie Dimon referred to an economic “hurricane” on the horizon last week, while Tesla’s Elon Musk has said he has a “super bad feeling” about the economy.
In his latest outlook, World Bank President David Malpass said that “for many countries, recession will be difficult to avoid” (AAP)
The reasons for the darkness? Malpass told the World Bank’s latest outlook on Tuesday that “war in Ukraine, confinements in China, supply chain disruptions and the risk of stagnation are hitting growth.”
Stagnation, the combination of stagnant economic growth and high inflation, has become a major concern lately.
The trend is reminiscent of experts and older consumers in the late 1970s, when an oil shock and a slow economy caused two recessions, the so-called double-dip recession, in the early 1980s.
Investors are nervous about the Federal Reserve aggressively raising interest rates in an attempt to crack down on rising prices. The problem, however, is that some fear that the Fed began its campaign to fight inflation too late. As a result, the central bank could cause a recession as it rushes to catch up with more rate hikes.
Mortgage rates have also risen, raising concerns that the housing market could slow dramatically. (Graphic: Tara Blancato)
The Fed’s short-term higher interest rate outlook has already led to a rise in long-term Treasury bond yields this year. Mortgage rates have also risen, raising concerns that the housing market could slow dramatically.
Companies are also facing higher raw material costs and wages and now have to deal with higher interest rates which can also hurt their results.
Add up all this and it’s easy to see why the World Bank is getting more and more nervous. The international lending organization now expects the global economy to grow at an annual rate of just 2.9 percent this year. This is well below last year’s 5.7% growth rate, as well as the World Bank’s January 2022 forecast of 4.1%.
Companies also face higher commodity costs and wages (Bloomberg via Getty Images)
“The recovery from the stagnation of the 1970s required sharp increases in interest rates in the major advanced economies, which played a prominent role in triggering a series of financial crises in emerging markets and economies. in development, “the World Bank said in its new forecast.
The World Bank does not expect a big rebound soon. He said global growth should “revolve around” the 2.9% level for both next year and 2024, and described the coming years as “a prolonged period of weak growth and high inflation.” .