Friday, December 9, 2022

Global economy in deep crisis and sending shockwaves 

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Market Desk (Economy): First, the pandemic is turned our lives and economies upside down and it is not over still. The continued spread of the virus could give rise to even more contagious or worse, prompting further disruptions and divergence between rich and poor countries.

2nd, the war: Russia’s invasion of Ukraine, devastating economy, is sending shockwaves throughout the globe.

Above all, the tragedy is humanitarian. The suffering of ordinary men, women and children in Ukraine and over 11mn people displaced. 

The economic consequences from the war spread fastest with longest far and hitting hardest with the world’s most vulnerable people. Millions of families were already struggling with lower incomes and higher energy and food prices. The war has made this much worse and threatens to further increase inequality.

The world economy is in deep crisis due to high inflation. Rising inflation has raised fears among investors. The protracted war between Russia and Ukraine is fueling inflation. News of concern is coming from different countries of the world. Consumers are getting lost as the prices of food and other necessities continue to rise.

Production is declining in Eastern and Western countries including Asia. In this situation, investors are not getting confidence in the market. The downward trend in US stock markets hasthe lowest rate of decline in 50 years. 

Top executives at the world’s 3 largest central banks have warned that lower inflation and lower interest rates are going to be history. Top executives from the US Federal Reserve, the European Central Bank and the Bank of England have met in Portugal and called for swift action to keep commodity prices out of control. Asked how far the recession could go due to the Ukraine-Russia war and the Corona superpower, they agreed that the risk now seemed greater. But it is not difficult to manage this risk in the long run. But the big mistake that world leaders have made is not controlling commodity prices. At present, Bank of England and the US have raised interest rates average 2%. Economists also think that the way different countries have raised interest rates will continue for a few more years. There are no signs of interest rate cuts anytime soon.

Capital markets around the world have plummeted amid fears that high inflation could slow economic growth. Investors are panicking and selling their shares. According to international media reports, the S&P index of the US stock market has had the biggest reading in the last 50 years. 

Besides, other indicators of the country’s capital market have also declined. Shares of Nasdaqand Dao Jones are also falling. The UK, the EU and Asian countries are also falling. 

The central banks of different countries are working desperately to reduce the cost of living of the people. In particular, the idea of ​​keeping food and fuel costs within reach is now on a large scale. But economists say the recession in the world economy has started long ago. But people’s suffering is increasing due to the continuous increase in interest rates. Top Chinese economist Dran Wang told the BBC that the rise in US Federal Reserve interest rates has had a negative impact on capital markets there. If the Russia-Ukraine war continues, the recession will increase.

In China, corona disrupted supply-production chain. In addition, the risk of a recession is increasing around the world including in Europe, due to supply disruptions and slowing economic activity. 

Meanwhile, the risk of a recession is increasing around the world as economic activity slows. Production activity in Japan, South Korea and Taiwan has been affected by supply shortages and rising prices. Yoshiki Shin, chief economist at the Dai Yichi Life Research Institute in Japan, said China’s economy is expected to recover after some weaknesses. But now the US and European economies are at risk of a recession. It will not be easy to deal with the recession due to various uncertainties in the world economy. Chinese raw materials are used extensively in factories around the world. For most of this year, the country’s factories have been shut down due to severe lockdowns in various parts of the country. This puts a strain on the production of factories in different countries. Although the situation has improved a bit, the factories have not returned to full production. This has left chaos in the supply system.

The UN agency, UNCTAD has said that the global economy is expected to grow this year due to the ongoing recession. 

According to the agency, the recession will be long-term in Russia. The countries of Western and Central Europe and the countries of South and East Asia will not be left out of this recession. In this recession, countries will be forced to reduce their development spending. As trade deficits between countries increase as imports of essential commodities increase, so will foreign debt and interest payments.

The IMF is trying to provide urgently needed policy advice and financing to those hardest hit by the double crisis. And IMF stands ready to work with our international partners to do even more.

By Lisanur Rasul

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