Global Economy May Face Recession

The global economy may face a recession next year caused by an aggressive wave of policy tightening that could yet prove inadequate to temper inflation, says the World Bank. Policy makers around the world are rolling back monetary and fiscal support at a degree of synchronization not seen in half a century, it says. That sets off larger-than-envisioned impacts in sapping financial conditions and deepening the global growth slowdown. Investors expect central banks to raise global monetary policy rates to almost four per cent next year, double the average in 2021, just to keep core inflation at the five per cent level. Rates could go as high as six per cent if central banks look to wrangle inflation within their target bands. Its study estimates 2023 global gross domestic product growth to slow to 0.5 per cent and contract 0.4 per cent in per capita terms that would meet the technical definition of a global recession. After record expansion in 2021, this would cut short recovery well before economic activity has returned to its pre-pandemic trend, it says.