(Original title: United Nations: The Fed and other central banks continue to raise interest rates, the global economy is on the verge of recession)
Financial Associated Press, October 4th (Editor Niu Zhanlin)On Monday, local time, the United Nations Conference on Trade and Development (UNCTAD) released the “2022 Trade and Development Report”, which warned that continued interest rate hikes in advanced economies may push the global economy into recession and then into long-term stagnation, Africa and Latin America. Developing countries in other places will bear the brunt.
The warning comes amid growing unease that the Federal Reserve and other major central banks are rapidly raising borrowing costs to curb soaring inflation.
The report predicts that the global economy will grow by 2.5% in 2022, before slowing to 2.2% in 2023. All regions have been hit by the slowdown in economic growth, but developing countries have been particularly affected.
Debt crises in South and West Asia are intensifying. Sri Lanka has fallen into sovereign default, Afghanistan remains in debt distress, and Turkey and Pakistan face soaring bond yields.
UNCTAD Secretary-General Rebecca Greenspan said there was still time to pull the economy back from the brink of recession and countries had the tools to tame inflation and support all vulnerable groups. But the current course of action is hurting the most vulnerable, especially in developing countries, and threatens to lead to a global recession.
The report noted that monetary and fiscal policies in advanced economies might lead to a global recession and prolonged stagnation. Rapid interest rate hikes and fiscal tightening in advanced economies, as well as the crisis caused by the superimposition of the COVID-19 pandemic and the Russian-Ukrainian conflict, have turned the global economic slowdown into an economic downturn, and a soft landing is unlikely.
The agency estimates that every one-percentage-point rise in the Fed’s key interest rate reduces economic output in the rest of the developed world by 0.5 percent over the ensuing three years, and 0.8 percent in poor countries.
Raising rates alone won’t reduce inflation
The United Nations Conference on Trade and Development also warned that the Federal Reserve’s rate hikes this year will reduce economic output in poor countries by $360 billion over three years, and that further policy tightening will do more damage.
“Focusing only on monetary policy, without addressing the supply side of trade, energy and food markets, might indeed exacerbate the cost of living crisis,” UNCTAD said. “In the current context of supply chain challenges and rising uncertainty Under the current situation, monetary policy alone cannot reduce inflation.”
UNCTAD recommends that countries focus on wage growth and continue to create jobs. Increase investment in infrastructure to boost employment, increase productivity, improve energy efficiency and reduce greenhouse gas emissions.
UNCTAD also urged countries to adopt a more pragmatic strategy, employing strategic price controls, windfall taxes, antitrust measures and stricter regulation of commodity speculation.
