World Bank shares its thoughts
The World Bank has sounded the alarm on a likely global recession next year, brought about by a five-decade high in average rate hikes among central banks.
“The global economy is now in its steepest slowdown following a post-recession recovery since 1970,” the World Bank said in its latest report. “Global consumer confidence has already suffered a much sharper decline than in the run-up to previous global recessions.”
This is being exacerbated by economic slowdown in the United States, China, and the euro area, which has become sharper in recent months.
“Under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession,” the report said.
However, the World Bank assured that central banks are in a position to control inflation without triggering a global recession – and this can be accomplished through “concerted action by a variety of policymakers.”
“Central banks must communicate policy decisions clearly while safeguarding their independence,” the report said. “This could help anchor inflation expectations and reduce the degree of tightening needed.”
“Fiscal authorities will need to carefully calibrate the withdrawal of fiscal support measures while ensuring consistency with monetary-policy objectives,” the World Bank added. “Policymakers should also put in place credible medium-term fiscal plans and provide targeted relief to vulnerable households.”