The UN agency in charge of trade and development on Monday called on central banks to quickly loosen the monetary noose in order to avoid a planetary recession.
We may be on the brink of a global recession caused by economic policies, said UNCTAD Secretary General Rebeca Grynspan when presenting the organization’s main annual report.
Cnuced has once again revised downwards its growth forecasts for the world economy. Our projections show that global growth of 2.5% in 2022 will decelerate further to reach 2.2% in 2023, said Grynspan.
In March, the organization reduced its global economic growth projection for 2022 from 3.6% to 2.6%.
The OECD, which maintained its 3% forecast for 2022, recently announced that it expects growth of 2.2% next year. The IMF, on the other hand, forecasts growth of 3.2% this year, and 2.9% in 2023.
It is traditional that a global growth rate of 2.5% is considered a growth recession, explained to journalists Richard Kozul-Wright, director of the team in charge of the report.
A still viable recession
Rapidly rising interest rates and fiscal tightening in advanced economies, combined with multiple crises resulting from the Covid pandemic and the war in Ukraine, have already turned weak global growth into a marked slowdown, according to UNCTAD. .
But there is still time to stave off the risk of a recession, according to Mrs Grynspan.
The American and European central banks have been trying to fight inflation in recent months by raising key rates, but fears of a recession caused by a sharp monetary tightening are intensifying.
Believing that they will be able to lower prices by relying on higher interest rates without causing a recession is, according to UNCTAD, a reckless bet.
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The shadow of recession hangs over the United States, and Germany should be, according to the OECD, the first major European economy to fall into recession next year.
According to Ms. Grynspan, countries have the tools to calm inflation and support all vulnerable groups.
It is a matter of political choices and political will. But the current course of action hurts the most vulnerable, especially in developing countries, and risks tipping the world into a global recession, she argues.
Monetary and fiscal policies taken by advanced economies are pushing the world into global recession and prolonged stagnation, inflicting damage worse than that of the 2008 financial crisis and the 2020 Covid-19 shock, UNCTAD warns.