Yes, the latest statement from World Bank signifies a warning of the economic crisis. As per their Global Economic Prospects report, global growth is expected to slump from 5.7 percent in 2021 to 2.1 percent in 2022. Earlier, in January, it was anticipated to reach 4.1 percent. “The war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation are hammering growth. For many countries, a recession will be hard to avoid,” said World Bank President David Malpass.
It all started with the outbreak of Covid-19 in China. To tackle the pandemic disaster, most countries imposed strict lockdown measures which gave rise to a new one –an economic disaster. While continuing the struggle with disasters through both health vaccines and economic relief measures, there arose a new disaster – war. This further acted as a blow and resulted in rising crude oil prices and food shortages, along with rising unemployment. This is the story of each country in the world irrespective of its development. Let’s closely view the conditions and measures taken by various countries, globally.
• Dollar inflation hits a 41-year highest figure of 8.6 percent in May, surging over 3.8 percent as compared to last year. This points out negative growth in the second phase of the current year.
• Alarming rise in the cost of living due to rapid inflation. Food prices increased by almost 9.4 percent within the six-month gap. Around 16 percent of the population agree that they face financial difficulties, as per an Ipsos poll for World Economic Forum. Apart from recent times, now inflation is occurring across the country beyond prosperous states.
• The United States was one of the first countries to impose sanctions against Russia, the world’s largest oil supplier. This led to an oil price hike in the country. This is considered to be a key factor in the current inflation rates. Note that the Russia-Ukraine war is just one of the contributing factors to this historic price hike.
• The following figures show chances for an increase in the unemployment rate, which currently stands at 3.6 percent.
• Federal Reserve, Central Bank in the U.S, takes stringent measures to control inflation. Federal Fund Rates are increased as a move to tighten the money supply. However, such aggressive moves on the part of authorities further worsen the livelihood of common people.
• Rising Covid statistics and the country's zero covid policy affected the economic scenario. The nation’s truculent measures in controlling the pandemic worsened the situation. Strict lockdown imposed on Shanghai, the country's largest urban economy resulted in shattering the industrial sector.
• World Bank and economists view that the GDP growth may dwindle to 4.3 percent in 2022 as compared to 8.1 percent the last year.
• Europe is one of the most Russia-Ukraine war-affected zones in the world. They bear the price of war between the two countries. The sanctions imposed upon Russia, which are seen as a countermeasure, acted as a blow to the economy.
• Britain witnesses the highest inflation rate in the last 40 years. The Organisation for Economic Cooperation and Development (OECD) predicted that the U.K will be the worst performing economy of any nation in the developed world in 2023, apart from Russia. The government declared a 1900-crore package to tackle the crisis.
• The economy of the nation collapsed accompanied by a transfer of power. Foreign exchange stumbled to less than 1 Billion dollars. The country failed to pay interest on the huge debts outstanding. The economy is still surviving just due to the enormous support from neighboring countries like India and China.
• Like Sri Lanka, Pakistan also faces the worst economic crisis shortly along with political instability. Due to declining foreign exchange, the Government imposes an import ban on foreign cars. Authorities are in negotiations with IMF to obtain a loan.
• The inflation rate shoots up. Petrol and diesel prices continue to a cruise leaving common people in disaster.
• Indian Rupee falls to all-time low as compared to American Dollar.
• The Indian Government tries to face inflation by reducing Petrol and Diesel price. Just like the U.S. country uses credit control policies to overcome the situation, which may further affect the lives of common people.
• The government anticipates a food shortage in the current war scenario and imposes control over wheat export.
• Last but not least, the worst face of the economic crisis would be faced by Africa.
• It would be the handiest task for a region affected by drought and internal wars, to overcome the food shortage and economic crisis strangling over the neck.
Reports suggest the need for decisive national policies and global efforts to avert the worst consequences of the anticipated crisis. This includes cushioning the blow of surging oil and food prices, stabilizing supply, and speeding up debt relief.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2022 Govind Panicker