Is a Global Recession on the Way?

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Just as the global economy is recovering from the COVID-19 pandemic, an increasing list of threats is clouding the economic outlook. But most economists still expect a recession this year is unlikely.
The Ukraine conflict, Russian sanctions, China’s “zero COVID” policy, soaring inflation, and interest rate hikes by the US Federal Reserve are all expected to crimp growth in 2022.
The question is whether deteriorating conditions and ill-judged policy choices could tip the global economy from a slowdown into a contraction.
Tara Sinclair, an economics professor at the George Washington University in Washington, DC, mentioned that “Recessions are incredibly hard to predict, and even good forecasters, e.g. the Fed, only know we’re experiencing a recession once we’re in one, not in advance.”
The Federal Reserve in the United States is faced with the difficult problem of lowering inflation, which is at a four-decade high, without triggering a recession by hiking rates too sharply.
A downturn in the world’s largest economy, which recorded its fastest expansion in decades last year, would reverberate globally, threatening to send growth into reverse barely two years after the world economy shrank 4.3 percent due to the pandemic.
Meanwhile, China’s ongoing efforts to stop the spread of COVID-19 with rigorous lockdowns and border controls are lowering local consumption and worsening global trade disruptions in the midst of the country’s largest outbreak yet.
Carsten Holz, an expert on the Chinese economy at the Hong Kong University of Science and Technology, told Al Jazeera China is unlikely to meet its growth target of 5.5 percent for this year.
“Given that the People’s Republic of China is currently unlikely to easily return to a zero COVID case scenario, supply chains will continue to be affected, leading to price increases, which in turn will contribute to the pressure on Western central banks to raise interest rates,” Holz mentioned.
Economists began to look at their initial back-of-the-envelope assessments of the impact on the global economy weeks after Russia began its full-scale invasion of Ukraine. According to a Bloomberg report, International Monetary Fund Managing Director Kristalina Georgieva also indicated last month that market instability will cause “a major shock” to weaker economies.

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