Economists: brace for slow growth & high costs, but not recession

Economists: brace for slow growth & high costs, but not recession

by Sakina Raj

While a global recession may not happen soon, economists are reportedly cautioning to brace for slower growth and rising prices.

Simon Baptist, Global Chief Economist at Economist Intelligence Unit, stated that there will not be a sudden recession after stagflation, a period of high inflation and low growth. However, the stagflation conditions will continue to last for at least the next 12 months.

Baptist stated that commodity prices will begin to show signs of easing from the next quarter, but will continue being permanently higher than before, as the supply of several commodities from Russia will be reduced permanently due to the war in Ukraine.

The supply of goods and commodities, and their efficient distribution via global supply chains, have been severely hindered by the pandemic and the war in Ukraine, leading to a rise in prices of food, fuel, and other everyday goods.

Even though higher prices will put pressure on households, growth continues to slowly trickle over across several parts of the world and job markets have remained stable. In fact, the rate of unemployment in various economies has been the lowest in decades.

Baptist added that in terms of consecutive periods of negative GDP, a recession is unlikely for almost all Asian economies, and consumers will be having enough savings and supply of household durables in such a situation.

Central banks across the globe are also increasing interest rates to prevent inflation.

The US central bank recently announced a 0.5% hike in interest rate, the highest in 22 years, and also warned of further rate hikes.

The Reserve Bank of New Zealand, which has been more vigilant than others, hiked up its cash rate by 0.5% for the fifth consecutive time last week. The country’s cash rate now stands at 2%, up by more than 1.75% since October last year, when the tightening cycle started.

However, economists warn that controlling inflation by increasing interest rates can risk inducing a recession, as it may cause even lower growth.

But not everyone shares the same opinion.

Vicky Redwood, Senior Economic Advisor at Capital Economics, stated that she is confident that central banks will be able to bring down inflation with planned rate rises, such as in the US, UK, and the EU, without provoking a recession.

Source credit: https://www.cnbc.com/2022/05/30/no-global-recession-yet-but-brace-for-stagflation-economists-say.html

Sakina Raj

Armed with a degree in English Literature, Sakina chose to explore the world of content writing and pursue it as a career. Sakina has been playing with words for over five years now and currently pens down articles for Marketprimes and various other online portals relating to diverse domains. Whe Read more...