World Bank says a widespread recession is likely, but something even worse could be coming

what is stagflation
what is stagflation?

Investors, bankers, and entrepreneurs have been discussing the chances of a coming recession for months. Now the world’s premier international credit institution is joining the chorus that a recession is likely, and warns that something even worse might be on the horizon.

Global economic growth is expected to slow down before the end of the year, and most countries should begin preparing for a recession, according to the World Bank’s latest global economic forecast released on Tuesday.

For many countries, recession will be hard to avoid,” wrote World Bank president David Malpass.

Growth takes a hit

The rate of global growth is expected to slow from 5.7% in 2021 to 2.9% this year, according to the report. The World Bank, which acts as an international lending body for developing economies, had forecasted 4.1% growth for 2022 last January.

The global economy had already been impaired by the aftereffects of the COVID-19 pandemic, which left international supply chains in tatters and significantly hampered income growth and poverty reduction efforts in developing countries, according to the report.

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This led the World Bank to predict a slower yet robust next few years of global growth starting from 2022, but after the outbreak of the war in Ukraine, the institution was forced to significantly downgrade its expectations to account for soaring food and fuel prices and disrupted international trade networks.

Just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger,” Malpass wrote.

In the U.S., Russia’s invasion of Ukraine and a rapid rise in prices have pushed the Federal Reserve into a strategy of aggressive interest rate hikes to tame inflation, but this is making investors increasingly skittish. If interest rates go too high, as more and more economists believe might be inevitable, the economy could risk backsliding into a contraction and a recession.

The word “recession” might evoke scary images of the 2008 market crash, but most economists think that if there is a recession, a downturn of that magnitude is unlikely, with most assuring people that the outcome will likely be a mild recession, as is normal at the end of business cycles.

But the World Bank is warning that even a mild recession could leave lasting scars on the global economy, as the combination of today’s economic forces could lead to “stagflation,” a mixture of low growth and high prices that is toxic to economies in developing countries.

The return of stagflation?

Malpass mentioned the threat of stagflation multiple times in the World Bank report, noting similarities in monetary policy environments between now and the last time stagflation hit.

Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies. It’s a phenomenon—stagflation—that the world has not seen since the 1970s,” he wrote.

Stagflation occurs when economic growth goes through a significant slowdown, but inflation and high prices persist. The last time the world went through a stagflationary period was during the 1970s oil shocks, when high oil prices caused high inflation worldwide and a recession in countries that imported large oil volumes from the Middle East.

Stagflation can be considered the worst of all worlds, as inflation usually tends to counteract a shrinking economy. But the same conditions that kick-started 1970s stagflation appear to be making a return.

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The interest rate increases that were required to control inflation at the end of the 1970s were so steep that they touched off a global recession, along with a string of debt crises in developing economies, ushering in a ‘lost decade’ in some of them,” Malpass wrote, adding that the same patterns of subdued growth, high interest rates, and escalating public debt in many countries are playing out today.

Resuming normal supply-chain operations and increasing production around the world are key to avoiding stagflation, Malpass said, but it won’t be easy. COVID-19 lockdowns in China’s production hubs over the past few months dealt a blow to global manufacturing, and energy constraints as a result of the war are standing in the way of supply chains returning to full normalcy. [Fortune] has been banned from ad networks and is now entirely reader-supported CLICK HERE TO SUPPORT MY WORK… I will send you a small gemstone if you give more than 25$… Thanks in advance!

Here some things to add to your disaster & preparedness kit:

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  1. All fiat currencies will go to zero. Barter in our future. The rich will be in the same situation when their survival supplies run out. Great equalizer coming. Prepare while there is some time left.

  2. Alot of good comments here. I remember the period from 1977-82 very well. People cut back on luxury items, and didn’t spend. People scrimped and saved. People that prepare for economic downturns are going to be fine. People that do not prepare will suffer most. Crime will rise, as we have seen. Reagan and Trump economies are what we need. Instead, we have self-enrichment specialist in Congress. They are greedy sociopaths and psychopaths. Central banksters are big dirtbags and political satanists.

    Our President is an installed marxist tool. People that vote left will get screwed the worst. We need a National Divorce. Conservative terrotories, and marxist pervert territories. Then huge walls to permanently separate each other.

  3. We are already in arecession…it is the coming Depression that worry’s me.
    When the City Folks realize they can’t get their Free Steak (Govt food/food stamps) Chicago and others will be on FIRE!

  4. The so-called covid19 released upon the world was a staged attack to injure significantly worlwide economies. Like Joe Biden who happily and eagerly agreed to be the dark-monied cabal’s trojan horse, covid19 was issued in preparation in bringing the world to its knees, with those behind the scheme taking world populations hostage such as seen by Biden, Trudeau, Newsom, Whitmer, Hochul, former gov Cuomo, former mayor de Blasio and numerous other money-grubbing villains.

  5. It’s just greedy banks and financial advisors that want to grab more money off everyone, at the moment a lot of humans have entered saturated greed mode. Too many are wanting to be the richest person in the world, they have no bounds once that greed sets in.

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