Is the global economy at risk of recession?

1. 1. In the second quarter, the United States (US) and euro area (EA) economies performed better than initial estimates, but the outlook remains uncertain
3. 2. There are fears of a global recession due to inflationary pressures across major advanced economies
5. 3. In August, coal and natural gas prices firmed up while food and crude prices continued to fall

In the second quarter, the GDP growth rate of major advanced economies was revised marginally upwards, reflecting an increase in economic activity as pandemic fears receded. Inflation is affecting real household incomes, slowing down the economic momentum. Meanwhile, central banks around the world have increased interest rates aggressively to control inflation, which further inhibits demand.

Recently, the World Bank noted that central banks around the world have been raising interest rates with a degree of synchronicity not seen over the past five decades. This trend is likely to continue into next year. As a result of this, ‘the world may be edging towards a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm’, the World Bank concurred.