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World Bank: ‘Many countries find it difficult to get out of recession’

Challenges from Russia – Ukraine, China, inflation make the World Bank pessimistic about the global economy.

In an update on the global economic outlook on June 7, World Bank President David Malpass commented: “For many countries, a recession will be very difficult to avoid.” Malpass explained the reasons for this pessimism are “conflict in Ukraine, blockade in China, supply chain disruption and risks of high inflation – slowing growth (stagflation) globally”.

Among them, stagflation is the latest concern. This trend reminds experts and older consumers of the late 1970s, when an oil price shock and a sluggish economy pushed the US into a double recession.

Malpass is also the latest name to issue a recession warning, after many business leaders and experts at central banks around the globe. Last week, JPMorgan Chase CEO Jamie Dimon said the bank was preparing for “an economic hurricane”. Meanwhile, Tesla CEO Elon Musk said he has a “very bad feeling” about the economy.

Investors are worried about the US Federal Reserve (Fed) raising interest rates quickly and aggressively to curb inflation. The problem, however, is that many people think the Fed acted too late and could push the US into a recession.

The possibility of the Fed raising interest rates higher in the short term is pulling US government bond yields higher. Mortgage interest rates also rose, raising fears of a freezing real estate market.

Businesses are also struggling with rising commodity prices and rising wages. Now, rising interest rates could also drive their profits down.

All of this makes the WB’s worries well-founded. The organization yesterday lowered its global growth forecast for this year to 2.9%, down sharply from 5.7% last year and 4.1% forecast earlier this year.

“During the 1990s, recovering from stagflation required aggressive interest rate hikes by advanced economies. This move played an important role in triggering financial crises in developing and emerging countries. “, the World Bank said in the report.

The organization does not think the world will recover strongly any time soon. Global growth could be around 2.9% over the next two years. The next few years will be “a period of high inflation and prolonged stagnant growth”.

Ha Thu (according to CNN)

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