U.N. economists warn the monetary and fiscal policies of advanced economies risk plunging the world into a recession worse than the financial crisis of 2008. UNCTAD, the United Nations Conference on Trade and Development has issued its annual Trade and Development Report 2022.
The authors of the report warn the world is teetering on the edge of a recession due to bad policy decisions by advanced economies, combined with cascading crises resulting from climate change, the COVID-19 pandemic, and the war in Ukraine.
They project this year’s global growth rate of 2.5 percent will slow to 2.2 percent in 2023. This, they say, will leave a cumulative shortfall of more than $17 trillion, close to 20 percent of the world’s income.
The report finds the slowdown is hitting countries in all regions, especially developing countries. It says growth rates in the poorer countries are expected to drop below three percent, damaging development and employment prospects.
UNCTAD Secretary-General Rebeca Grynspan says middle-income countries in Latin America, as well as low-income countries in Africa, will register some of the sharpest slowdowns this year.
“In Africa, an additional 58 million people will fall into extreme poverty in 2022 adding to the 55 million already pushed into extreme poverty by the COVID-19 pandemic,” Grynspan said.
Grynspan says developing countries are facing alarming levels of debt distress and under investment. She says 46 developing countries are severely exposed to multiple economic shocks. She adds another 48 countries are seriously exposed, heightening the threat of a global debt crisis.
“So, countries that were showing signs of debt distress before COVID are taking some of the biggest hits, with climate shocks further threatening economic stability,” Grynspan said. “This is increasing the threat of a global debt crisis. So, countries urgently need real debt relief.”
Grynspan says there is still time to step back from the edge of recession if countries use available tools to calm inflation and support vulnerable groups.
Among its recommendations, UNCTAD urges a more pragmatic strategy that deploys strategic price controls, windfall taxes, anti-trust measures and tighter regulations on commodities speculation.