Inside Out | Hong Kong is reconnecting with a world economy heading for a deep recession and stagflation

Experts are predicting the deepest global recession in 40 years, led by the US, Europe and China, amid record debt and rising costs – just as Hong Kong is looking for a boost following over 30 months of economic self-harm

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A woman walks past closed retail shops in Mong Kok on September 19. Hong Kong stock and property markets are down, while small and medium-sized enterprises face unprecedented difficulties. Photo: Edmond So

Published: 9:15am, 26 Sep 2022

As we in Hong Kong celebrate an end to almost 1,000 days of pandemic-induced isolation and prepare to reconnect with the world, it is timely to think about what kind of global economy we are re-engaging with.

The ugly reality is that we are emerging from over 30 months of acute and potentially permanent economic self-harm only to join a world economy poised to tumble into its deepest recession in four decades, with stagflation of maybe five years or more.

“The world may be edging towards a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm,” said the World Bank in a recent report.

It pointed to a steep global slowdown synchronised across the largest economies (the United States, China and the European Union), with economic growth down to 0.5 per cent, inflation above 5 per cent, and a sharp collapse in consumer confidence. The last deep recession in 1982 triggered more than 40 debt crises worldwide.

“Collectively, Europe, the US and China make up about half of world GDP,” said Yale University’s Stephen Roach in the report. “With no other economy able to fill the void [...] a global recession does indeed appear inevitable.” Harvard University’s Kenneth Rogoff agrees: “The odds of recession […] are significant and increasing, and a collapse in one region will raise the odds of collapse in the others.”

A pedestrian passes a closed-down retail store in London, on September 1. Britain is expected to fall into recession by the end of this year and will remain there until 2024, the Bank of England has said. Photo: EPA-EFE

Nouriel Roubini, nicknamed Doctor Doom for predicting the 2008 global financial crisis, noted recently that “some of the worst elements of both the 1970s and the 2008 crash are now in play”.

.css-1m2rp1p{color:#34b8b5;}Inside Out | Hong Kong is reconnecting with a world economy heading for a deep recession and stagflation

Inside Out | Hong Kong is reconnecting with a world economy heading for a deep recession and stagflation