A new study authored by the World Bank suggests a consensus forecast indicating that the global economy could experience dramatic declines in growth over the next two years in news it suggests “do not augur well for the likelihood that a global recession can be avoided”.
Through a systematic study drawing on insights from previous global recessions, new analysis from the World Bank asserts that rising inflation rates across the globe are already seeing rapid deterioration of economic growth prospects, with predicted attempts to rein in these soaring inflation rates increasing risk and likelihood of triggering a global recession.
High and rising core inflation rates in various countries around the world have already been seen in recent weeks and months, as the global economy seeks to not only rebound from the COVID-19 pandemic but additionally adapt and respond to geopolitical developments and climate disasters impacting supply chains, such as the war in Ukraine and record droughts impacting Europe, United States and parts of Asia.
A recent Reuters poll showed that Japan’s core consumer inflation rate had reached what is thought to be a near eight-year high in August, one month after Singapore’s core inflation rate rose at its fastest pace in over 13 years. In Europe, the European Union’s Core Inflation rate rose to 5.22 percent in August, rising 6.7 percent from July’s rate and a dramatic 87 percent higher than the core inflation rate of January this year.
In the United States, meanwhile, core inflation rose to 6.3 in August while still remaining down from the level seen in March.
In Q2 of this year, Australia saw its own sharp spike, with the annual rate hitting 6.1 percent – the highest in 21 years and at a growth rate twice that of wage growth. This as Australia’s Reserve Bank predicts that the worst remains yet to come, predicting inflation could soar as high as 7.75 percent before the end of the year.
The global inflation rate rises have seen central banks from every corner of the world looking to raise interest rates at what the World Bank describe as “a degree of synchronicity not seen over the past five decades”, though the combined efforts may well see the global economy remain short of avoiding a global recession particularly if policy-makers do not look to negotiate inflation in lateral ways.
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession,” World Bank Group President David Malpass said in a statement, “My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging markets and developing economies.”
“To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production. Policies should seek to generate additional investment and improve productivity and capital allocation, which are critical for growth and poverty reduction.”
Not all hope is lost with respect to avoiding global recession, however, with the World Bank’s study also suggesting that collaborative fiscal policy efforts could still work to stave off the worst case scenarios. In particular, it flags efforts to ease labour-market constraints, boost global supplies of commodities through international coordination and the strengthening of global trade networks as being keys to avoiding recession.
E-commerce merchants, meanwhile, may be particularly well placed to withstand the predicted economic turbulence of the coming months. As mentioned here on Power Retail early last week, online retailers can seize opportunities to reach cost-conscious consumers looking to avoid areas where rises in the cost of living are being most acutely felt, such as at the petrol pumps.
Ultimately, while the World Bank’s study and predictions appear dire at face value, one of the most valuable lessons to learn from it certainly appears to be its acknowledgement that we have been here before. This is a lesson that economist Craig Ferguson also alluded to when addressing the Power Retail Connect event held late last month, who spoke not only on the cyclical nature of economic events such as recessions occurring throughout history, but drew additional comparisons to past such phenomena in order to offer predictions for times ahead.
In welcome advice for retailers, Ferguson suggested that “this is an invigorating time” for retailers who are willing to adapt, withstand and embrace opportunities to emerge from this economic climate well-placed to succeed on the other side.
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