World Trade Organisation Chief Ngozi Okonjo-Iweala said she believes that the world is inching closer to a global recession due to crises like the Russia-Ukraine war, climate crisis, high food prices, energy crisis and the COVID-19 pandemic. She also called for radical policies for reviving growth.
She pointed out at the opening of the WTO's annual forum in Geneva that her top concern is to ensure food security and access to energy. She was quoted as saying by news agency AFP: "The spectre of not having enough food is one that worries me." She stated that central banks will have to tighten and increase policy rates in order to tackle inflation.
The WTO boss said that central banks don't have much of a choice but to tighten and increase interest rates, but the repercussions on emerging markets and developing countries are quite severe, because they are tightening an increase in interest rates. She stated that central banks had to determine whether strong demand had led to inflation or a rise in prices due to supply side issues.
The head of the WTO is not the only one to sound the warning of the recession. The World Bank also stated in a report that central banks around the world are likely to raise policy rates next year. According to this report, investors can expect central banks to raise their monetary policy rates to around 4 per cent 2 percentage points more than their 2021 average.
World Bank president David Malpass talked about the global economy's rapid fall into recession and the impact this will have on emerging markets and developing economies. Malpass said policymakers should focus on boosting production instead of boosting production.
He stated that policymakers could shift their focus from reducing consumption to boosting production to achieve low inflation rates, currency stability and faster growth. Policies should seek to generate additional investment and improve productivity and capital allocation, which are critical for growth and poverty reduction. Policymakers in emerging markets and developing economies need to be prepared for the potential spillovers from the global synchronous tightening of policies, as noted by World Bank Acting Vice President Ahyan Kose. Domestic and global markets began on a sombre note today amid apprehensions of a global recession. The BSE and NSE fell sharply in opening trade on jittery global markets and the upcoming Reserve Bank of India monetary policy committee meeting on Friday. Since India's valuations are high relative to peers, investors may be prepared for more corrections in this bearish scenario. A turnaround in global market sentiments will happen only when data shows a decline in US inflation, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Wall Street hit bearish notes as the S&P 500 futures fell 0.8 per cent, while Nasdaq futures were down 1 per cent. This is the seventh session in which the S&P 500 has logged losses. Asian markets suffered a huge drop as MSCI's broadest index of Asia-Pacific shares outside Japan dropped to its lowest since April 2020 at 2 per cent, while Nikkei shed 2.2 per cent and South Korean stocks fell 3 per cent to a two-year low.