Macroscope | World needs more fiscal stimulus to avoid another recession
- Large parts of the global economy are weakening and could slip back into negative growth, threatening the pandemic recovery
- For financial markets bingeing on a liquidity-fuelled spending spree, the global rally in risk assets could be on borrowed time
With a growing body of forecasters slashing projections for 2022 world growth, the spectre of global recession is rising up again. Large parts of the global economy are weakening and could easily slip back into negative growth, especially in war-afflicted Europe. The Russian invasion of Ukraine has been bad timing for the world economy, coming at such a vulnerable point in the recovery from the Covid-19 pandemic.
It is a major headache for world policy leaders desperate for a return to normality but anxious to avoid making conditions even worse. For financial markets bingeing on a liquidity-fuelled spending spree, the global rally in risk assets could be on borrowed time.
As far as the Group of 7 major economies is concerned, the outlook has deteriorated sharply as the Ukraine crisis has deepened. Britain seems likely to be the front runner for recession this year as it faces its biggest income squeeze in nearly 50 years and with consumer confidence close to an all-time low.
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