Opinion | How bad policy decisions are choking the life out of post-Covid global economic recovery

Misguided policies around the world have compounded the effects of supply chain disruptions and the war in Ukraine, putting an end to the global recovery

Policymakers have little room for error to coordinate fiscal and monetary actions to tame inflation and improve long-term growth

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A father and son share a meal at their shanty home in Colombo, Sri Lanka, on October 5. The country is currently facing its worst economic crisis in decades. Photo: AP

Published: 11:30pm, 9 Oct 2022

The post-pandemic recovery has run out of steam. The latest update to the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery shows that growth momentum and financial market and confidence indicators have deteriorated markedly around the world in recent months.

As the global economy stalls amid heightened uncertainty and rising risks, many countries are either in or on the brink of outright recession.

Some wounds have been self-inflicted. Misguided policies such as China’s “zero-Covid” strategy and the UK’s reckless “mini-budget” have made it harder for policymakers to respond to ongoing supply chain disruptions and the protracted war in Ukraine.

Persistent and high inflation worldwide and the actions central banks have taken to rein it in are depressing economic activity, weakening household and business confidence and roiling financial markets. In major advanced economies, including the euro zone, Japan and the UK, sluggish and tepid policy responses have compounded the effects of external shocks, knocking growth trajectories off track.

Consequently, many developed countries face the challenges that have long characterised periods of economic and financial stress in emerging economies: steep currency depreciations relative to the US dollar, rising government bond yields, strained public finances and tightening policy constraints.

The US economy, for its part, is rife with conflicting signals. On the positive side, consumer demand remains strong and employment has continued to grow at a reasonably healthy pace.

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