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With many countries currently experiencing an economic downturn, it is hard to avoid the possibility of another recession. The World Bank believes that this will be true with its president David Malpass, saying that “recession will be hard to avoid.”
There have been many predictions about when the next recession will come and who will be most affected by it – from banks on Wall Street all way down to central bankers in countries around the world.
Lately, the economy is becoming more tricky to navigate. It’s why people like Elon Musk, Tesla’s CEO, said that he has a “super bad feeling” about the economy and Jamie Dimon, CEO of JPMorgan Chase, explained that an economic “hurricane” is impending.
The World Bank has a mostly negative view of the global economy because of a myriad of factors, including wars, lockdowns in China, supply-chain problems, and stagflation.
Conditions in the United States seem similar to what they were during much of the ’70s and ’80s, with high unemployment rates due to anemic growth.
The economic term “stagflation” was coined to describe a time when there was slow growth and high inflation.
The Federal Reserve has taken an aggressive and unprecedented step to curb rising prices by increasing interest rates. The initiative was too late, said experts, as they predict that banks would have already thought of declaring a recession.
The Fed’s move to temporarily raise rates has caused bond prices and mortgage interest rates alike to spike. Many fear this move will have a negative impact on housing markets.
The struggle for business owners is intense. With commodity prices increasing and labor costs jumping, many small businesses are struggling to keep up.
The World Bank expects the global economy to grow at the pace of 2.9% this year – a decline from the 5.7% projected last year and a big difference from the prior forecasts at 4.7%.
“The recovery from the stagflation of the 1970s required steep increases in interest rates in major advanced economies, which played a prominent role in triggering a string of financial crises in emerging market and developing economies,” the World Bank said.
As the World Bank suggests, economic growth will continue to be low throughout 2024. So far, there are no concrete signs that things are getting better.