Economists: Global Recession Is Not Imminent, But It Is Coming

Dubai: Khansa Al Zubair
Economists believe that a global recession is not imminent, but there is a possibility of higher prices and slower growth, and Simon Baptiste, chief global economist at the Economist Intelligence Unit, sees that there will be no surprise after “stagflation,” referring to the sudden stagnation after period of it.
In his interview with CNBC last week, Simon Baptiste said: “With the Ukraine crisis and pandemic disruptions continuing to wreak havoc on supply chains, stagflation (low growth and high inflation) will continue for at least the next 12 months. ».
He added: “Commodity prices will start to decline from the next quarter, but they will remain permanently higher than they were before the war in Ukraine; The reason is that Russian supplies of many basic commodities will be permanently reduced.”
oscillate growth
He believes that high prices will be a burden on families. However, growth in many parts of the world – although slow – is still fluctuating and labor markets have not collapsed. And the consumer does not need to start preparing for a recession despite his caution that the recent global recession caused by the subprime mortgage crisis in the United States will repeat over 10 years, and for almost all Asian economies a recession is unlikely if we are talking about consecutive periods of GDP passive.
not now
Shane Oliver, chief economist at AMP Capital, agrees, who argues that a recession is not now; At least not for the next 18 months, he wrote in a note: “The yield curves, or the gap between the interest rate of long- and short-term bond yields, have not strongly reversed, or warned of a recession, and even if they did now the recessionary average is 18 month”, and believes that a bear market in the United States and Australia can be avoided.
Anti-inflation
Meanwhile, central banks around the world are tightening interest rates to combat inflation, and the US central bank announced the largest rate increase in more than 22 years, raised the benchmark interest rate by half a percentage point in the past two months, and warned of more The increases, and the Federal Reserve, is talking about multiple interest rate increases of 50 basis points as they try to bring down inflation.
New Zealand reserve
The Reserve Bank of New Zealand, which was more hawkish than other central banks, raised the interest rate by another half a percentage point to 2%; This was the fifth straight increase, and the rate has now risen by 1.75 percentage points since the tightening cycle began in October. to 3% and at 6.9%, and we are a long way from that… We are intent on containing inflation.” But economists say there is always a risk that controlling inflation will lead to a recession.
curb prices
It is known that stagflation is difficult to control, as curbing high prices by raising interest rates may lead to lower growth, and Oliver says: “The longer inflation remains high, the more investment markets worry that central banks will not be able to To curb it without causing a recession, and as Fed Chair Powell has pointed out, lowering inflation to 2% would involve some struggle” but not everyone is affected.
inflation rates
Finally, Vicki Redwood, chief economic adviser at Capital Economics, says she is confident that central banks will be able to bring down inflation without triggering a recession, and that planned rate hikes in many places, such as Europe, the United Kingdom and the United States, should be enough to restore “But if inflation expectations prove to be more robust than we expect, and interest rates need to be raised further as a result, a recession is likely,” she said in a note, adding that a “Volcker shock-style” recession It may be justified, and the Volcker shock occurred when Federal Reserve Chairman Paul Volcker raised interest rates to the highest point in history in the 1980s in an attempt to end double-digit inflation in the United States.