UN Says Financial Tightening Could Trigger Global Recession

The United Nations is asking central banks to loosen their belts to prevent a global recession, mentioning that financial tightening can push the world into prolonged stagnation.

In UNCTAD’s annual report, the UN Conference on Trade and Development revised its growth forecasts for the world economy.

Back in March, they reduced the 2022 global economic growth from 3.6% to 2.6%

Now, the growth is projected to be 2.5% for this year and notes a 2.2% decrease in 2023.

UNCTAD says that the fast-increasing interest rates, financial tightening in advanced economies, the Russia -Ukraine war, and prolongest threats of the pandemic are further bringing the global economy down.

UNCTAD Secretary-General Rebeca Grynspan even told the press that “We need to warn that we may be on the edge of a policy-induced global recession,”

The agency then says that inadequate financial support can affect developing countries and leave them exposed to crises relating to debt, the pandemic recovery, and climate shocks.

According to Grynspan, “there’s still time to step back from the edge of recession,”

European and US central banks have been struggling to combat inflation in the past few months by increasing key rates but fears of a recession exacerbated by harsh financial tightening are escalating.

UNCTAD has said that “Any belief that they will be able to bring down prices by relying on higher interest rates without generating a recession is… an imprudent gamble,”

According to the OECD, they predict Germany as the first major European economy to fall into a recession in 2023.

Source: Philstar