Saturday, October 1, 2022

Outgoing World Bank economist Reinhart ‘doubtful’ global recession can be avoided

World Bank chief economist Carmen Reinhart said she doubts the US and global economies could dodge a recession, given rising inflation, sharp hikes in interest rates and slowing growth in China.

Reinhart, who returned to Harvard University on July 1 after a two-year public service holiday, said it was historically a tall order to reduce inflation and engineer a soft landing at the same time, and that recession risks were clearly visible. are a “hot topic”. moment.

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“Everyone’s concern is that all risks are downside,” Reinhart told Reuters in a remote interview, citing several unfavorable shocks and moves by the Federal Reserve to raise interest rates after a decade and a half of ultra-low Giving told Reuters. and negative rates.

The 2008-2009 global financial crisis mostly affected a dozen advanced economies and China was a major engine of growth at the time, but the crisis is far more widespread and China’s growth is no longer in double digits, she said.

The World Bank this month lowered its global growth forecast for 2022 by nearly a third to 2.9 percent, warning that Russia’s war in Ukraine had added to the damage from the COVID-19 pandemic, and that many countries are now faced recession.

It said global growth could fall to 2.1 per cent in 2022 and 1.5 per cent in 2023, with per capita growth dropping to near zero, if there is a downside risk.

Asked whether a recession could be avoided in the United States or globally, Reinhart said, “I’m very skeptical. In the mid-1990s, under[Fed]chairman (Alan) Greenspan, We had a soft landing, but inflation concerns at the time were around 3 percent, not about 8.5 percent. Not that you can point to a lot of episodes of significant Fed tightening that haven’t impacted the economy .

Reinhart said the Biden administration was not alone in misidentifying the extent of inflation risk, noting that the Fed, the International Monetary Fund and others shared that view, although the World Bank called it a “real risk”. .

“The Fed should have acted — and I’ve been saying it for a long time — more aggressively sooner than later,” she said. “The longer you wait, the more drastic measures you have to take.”

Read more: Explainer: how high is the risk of another recession in the US?

Nation World News Desk
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