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Global growth is expected to slow “perilously close” to recession this year, the World Bank said Tuesday, slashing its economic forecast on high inflation, rising interest rates and Russia’s invasion of Ukraine. news online
The “sharp, long-lasting slowdown” will likely see world growth drop to 1.7 percent, roughly half the rate earlier predicted and among the weakest pace in decades, said the Washington-based development lender in its latest report.
“Given fragile economic conditions, any new adverse development… could push the global economy into recession,” the World Bank said.
Such disruptions include higher-than-expected inflation, sudden spikes in interest rates to contain surging prices, or a pandemic resurgence.
In advanced economies such as the United States growth will likely slow to 0.5 percent in 2023, said the Global Economic Prospects report.
Meanwhile, the euro area is expected to flatline.
“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment,” warned World Bank President David Malpass.
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Notes from APS Radio News
From the early part of March 2020 to April 15, 2022, the US Federal Reserve had been increasing its holdings by nearly $5 trillion dollars.
It did this each month of that period by buying billions of dollars of corporation and government bonds, in effect, infusing massive amounts of money into the economy.
And, as the FRED graph shows, it did so at rapid rate or at a high rate of velocity.
Economists say that when massive amounts of fiat money are infused into the economy at high rates of velocity, the likelihood of noticeably higher rates of inflation is made greater.
A number of other central banks followed a similar policy.
For example, between late February 2020, even days before the media started fixating on the virus thingy, and March of this year, the European Central Bank embarked on its own version of monetary expansion.
During that period, the ECB increased its holdings by over 5 trillion euros.
The Bank of Japan also increased its holdings.
Between February of 2020 and earlier this year, it had increased its holding by a few hundred trillion Yen.
For a number of years, including the Bank of Japan, major central banks have kept their interest rates low.
For its part, the Bank of Japan kept its interest rates at negative rates, meaning that depositors had to pay banks to hold their money.
During and before the pandemic, major corporations had increased the number of mergers and acquisitions, as those entities were able to make their purchases using inexpensive money and higher stock valuations.
The other part of the equation was that of supply.
As a result of lockdowns, many small and medium-sized businesses were closed.
Shipping ports had lost workers, and truck drivers going to those ports had to wait in long lines, as a result.
In effect, well before Russia’s invasion of Ukraine, shortages of various goods and services developed.
The invasion and sanctions imposed have aggravated shortages of commodities like petroleum and grain.
And there have been instances of price gouging.
