The World Bank has issued a warning about the likelihood of global recession, with president David Malpass believing it will be “hard to avoid” for many countries.
Malpass is one of the prominent figures expressing concern about the impending economic downturn of many countries. Among others who think of the probable upset are analysts from Wall Street and central banks.
Business executives have also said the same thing. Tesla CEO Elon Musk said he has a “super bad feeling,” while Jamie Dimon, Chief Executive Officer at JP Morgan Chase & Co., says we may be seeing an economic hurricane come towards America.
Malpass says that “the war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation” all contribute to the worsening conditions of America.
There is a lot of concern among economists that the current economic conditions may be similar to what happened in the 70s and 80s when there was a double-dip recession caused by extreme stagflation.
Stagflation is when the economy experiences slow economic growth, often with high inflation.
The Federal Reserve has launched an aggressive initiative to curb rising prices, but investors are convinced that it’s too late because banks will have no choice other than to declare a recession.
The Federal Reserve’s recent decision to increase rates has caused a rise in bond prices and mortgage interest. This could negatively impact the housing market and the Treasury.
As the cost of raw materials, commodities, and labor cost increases, business executives are struggling to stay afloat.
The global economy is expected to grow at the pace of 2.9% this year, says the World Bank. However, the figure is a huge drop from the 5.7% of last year and a steep difference from prior projections, which is pegged at 4.7%.
“The recovery from the stagflation of the 1970s required steep increases in interest rates in major advanced economies, which played a prominent role in triggering a string of financial crises in emerging market and developing economies,” the World Bank explained.
The World Bank is projecting that the growth of our economy will continue to be low in 2024. They don’t see any signs or hints of a big comeback as conditions all across this world remain far from getting better.