There are high chances that 2022 might end in a global recession. The Chinese lockdown, Russia-Ukraine War, and Supply Chain disruptions have slowed the world’s economic growth and for developing nations recession will be difficult to avoid. The great inflation occurred in the second half of the 20th century lasting from 1965-1982, countries like the United States, India, France, Italy, Israel, and Spain faced major protests in their regions because of high inflation.
In 2022 we are facing something similar to the situation which occurred in the 1960s to 1980s.
People all around the world are protesting as the cost of living is extremely high, wages are
low, oil prices have shot up, massive supply chain disruption, massive energy shortage in
European nations, and an all-time high unemployment rate. The world today is going through
massive economic distress. It is evident from the worldwide protest which is going on
People in Buenos Aires, Argentina is protesting against the inflation, anti-government protests
are taking place in Ecuador, British trade unions are protesting against inflation by going on a
massive strike, Pakistan is facing massive protest because of high prices of oil and essential
commodities, and Brussels is also facing protests because of the high cost of living.
The current juncture resembles the 1970s in mainly three key aspects: persistent supply chain
disruptions, protracted period of highly accommodative monetary policy, and vulnerabilities
emerging in markets in developing nations. The inflation was initially limited to the stock
market but now it is impacting everyone. The major and the common concern of the people
around the world is the high cost of living.
INFLATION AROUND THE WORLD
Global inflation has increased in a quarter of 2022, apart from the obvious reasons like the
Covid-19 pandemic, the Russia-Ukraine war, and supply chain and transportation issues. Major
concerns have grown regarding energy, food, and commodity prices.
Overall, global inflation is forecasted to accelerate in 2022-2023. Globally is forecast to reach
7.9% in 2022 and 5.0% in 2023. Mostly, countries with higher energy dependency will
experience a higher inflationary impact in 2022. it is predicted that small businesses and
consumers in both emerging and developing nations will experience rising prices adding more
pressure to the profit margins of businesses.
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• The inflation rate in the U.S is forecast to increase to 7.5% in 2022.
• The inflation rate in the UK is forecast to reach 7.5% in 2022. Mainly because of the
high prices of fuel and energy prices.
• The inflation in Brazil is forecast to reach 9.7% in 2022. Mainly because of the supply
chain disruptions and a rise in consumer price growth.
• The inflation rate in China is forecast to reach 2.7% in 2022. As the ‘zero covid-19
policy’ of China has decelerated growth, however, China is prone to potential increase
because of the rising energy prices and agricultural commodities.
• Countries like Germany, Italy, and Spain are expected to see a price increase with an
inflation forecast at 6.7%, 6.5%, and 7.8% respectively.
EXPERT’S RESPONSE ON GLOBAL INFLATION 2.0
As the Russia-Ukraine conflict intensifies and fuel and energy prices are shot up, experts worry
that the world is moving towards a global recession. In the recent World Economic Forum
meeting, the major discussion was on global inflation and what can be done to strike a balance
in supply and demand to make the economy stable.
“We are not necessarily in one yet but we are moving towards a great recession,” said David
Rubenstein, co-founder, and co-chairman of Carlyle at the World Economic Forum (WEF).
• “We have downgraded projections for growth for 143 countries, accounting for 86
percent of GDP,” said François Villeroy de Galhau, governor of the Central Bank of
France.
• ‘Inflation may remain above RBI’s target band for three quarters marking the first official
‘failure’ of monetary framework’: Rahul Bajoria, Chief India Economist, Barclays.
Developing economies will have to balance the need to ensure fiscal sustainability with the
need to mitigate the effects of today’s overlapping crises on their poorest citizens,” said Ayhan
Kose, Director of the World Bank’s Prospects Group
Communicating monetary policy decisions, leveraging credible monetary policy frameworks,
and protecting central bank independence can effectively tackle inflation expectations and
reduce the amount of policy tightening required to achieve the desired effects on inflation and
activity. It is however advised to the experts that they should refrain from policies such as price
controls, subsidies, and export bans which can make the situation worse especially the increase
in commodity prices. Governments all around the world are required to reprioritize the
spending toward targeted relief for vulnerable populations. As far as the supply chain is
concerned countries are advised to respond vigorously to the supply at the national level whilst
keeping the global commodity markets functioning well. It is advised that globally we have to
come together to limit the harmful effect of the Russia-Ukraine war on the global economy and
to overcome the high energy prices as a whole.
