The world’s economic situation is evident to all global citizens and it is not a good sight. From inflation to price hikes and rising living costs, the entire globe has been pushed into this economic crisis where governments are struggling to control the protests in their countries as people are coming out on the street against the rising living expenses. From the United States of America to Singapore, countries are facing a major economic crisis that shows no signs of slowing down anytime soon.
Lowering the Expectations
You might already know that the increasing energy and food prices are causing chaos worldwide. It is slowing down the capital flow to markets that are in their emerging phase and given the conditions of the pandemic and a slow down in China has only made it more challenging for the policymakers at IMF. Ceyla Pazarbasigoglu, who is IMF’s director for strategy, policy, and review, spoke about the current situation at a panel in Bali, Indonesia. The director continued and mentioned how it came as a shock after shock, resulting in a decline in the global economy. In the panel, there were around 20 finance ministers and central bank governors, but the result wasn’t quite pleasing as they cited difficulty in coordinating a global response to recessionary fears and increasing inflation.
Going Down and Under
Due to the current global economic situation, IMF has already taken measures to downgrade its outlook for global expansion, which originally sat at 4.4% but now has been lowered down to 3.6%. Pazarbasioglu states that the IMF will downgrade the forecast significantly in the upcoming review. Central banks worldwide are struggling to develop a fruitful plan for their countries as the prices continue to increase and the economic situation worsens.
Hyun Song Shin, the head of research at the Bank for International Settlement, one of the panel members in Bali, spoke about the lack of options for governments. He stated that the path to soft landing is narrowing down and while it might be a difficult path but it is still a feasible one. While in the previous years, the biggest threat to global economic growth was the COVID-19 Pandemic but states now have to face another horror in the form of fuel price hikes and supply chain disturbance.
A Disturbing Sight
In a study shared at the beginning of 2022, according to the World Bank, the global growth will decelerate from 5.55% in 2021 to 4.1% in 2022 and then drop significantly to 3.2% by 2023. As of now, western countries are seeing a significant increase in their living costs, and developing countries are struggling to keep their economies afloat.
With counties like Singapore on the brink of bankruptcy, it is high time that the world power shifts their focus to this disease which might result in a far more devastating effect than the COVID-19 Pandemic.
