MAY - JUNE 2022 VOLUME 21 ISSUE 28
EDITOR’S NOTE SANJAY KUMAR EDITOR-IN-CHIEF INTERNATIONAL FINANCE
Stagflation looms large
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ccelerating the pace of damage from the COVID-19 pandemic, the Russian-Ukraine war has further given a fillip to the slowdown in the global economy, which is entering a phase of feeble growth and high inflation. According to the latest report of the World Bank titled Global Economic Prospects, the economic situation we are in raises the risk of stagflation, with potentially negative impacts for middle- and low-income economies alike. Global growth is expected to drop from 5.7% in 2021 to 3% in 2022. The latest forecast is significantly lower than the 4.1% made in January. This growth rate might continue in 2023-24, as the war in Ukraine will disrupt investment and trade in the near term. It will also lead to fading of pent-up demand and the withdrawal of fiscal and monetary policy accommodation. The ill effect of the pandemic and the war will reflect in the per capita income of the developing economies, which will be nearly 5% below its pre-pandemic level. This report of the World Bank offers the first systematic assessment of how current global economic conditions are comparable to the stagflation of the 1970s, which could affect emerging markets and developing economies. The recovery from the stagflation of the 70s required steep increases in interest rates in major advanced economies, triggering a chain of financial crises in emerging markets. Apart from covering the various aspects of the global economy, including inflation and raising the interest rate to control that, we have also tried to analyze the downtrend in the global stock market. Our cover story on cryptocurrency in this issue is part of an overall global economic scenario.
skumar@ifinancemag.com www.internationalfinance.com
International Finance | May - June 2022 | 3
