Global recession deepens as tech giants fall down

Newsdesk
3 Min Read

The global economy is facing its worst downturn since the 2009 financial crisis, as rising interest rates, banking troubles, and geopolitical tensions take their toll on growth and confidence. The tech sector, which has been one of the main drivers of innovation and productivity in recent years, is also suffering from a sharp decline in demand and profitability.

According to the latest forecasts from the International Monetary Fund (IMF), the world economy will grow by only 2.7% in 2023, down from 6% in 2021 and 3.2% in 2022. This would be the weakest performance since 2001, excluding the global financial crisis and the acute phase of the COVID-19 pandemic.

The IMF warned that inflation is “the most immediate threat to current and future prosperity”, as higher prices erode consumers’ purchasing power and squeeze businesses’ profit margins. To combat inflation, central banks around the world have been raising interest rates at an unprecedented pace, making borrowing more expensive for households and firms.

However, this monetary tightening has also increased the risk of a hard landing for the global economy, as higher interest rates dampen investment and consumption. Moreover, some countries are facing additional challenges from banking crises or political instability.

In Europe, growth prospects have been severely affected by the ongoing war in Ukraine and its spillover effects on trade and energy supplies. The region’s banking sector is also under stress following the collapse of Silicon Valley Bank (SVB) in December 2022 and worries over the fate of Credit Suisse (CS), which has been struggling with legal issues and losses from its exposure to SVB.

The global recession will have significant implications for individuals, businesses, and governments around the world. It will increase poverty levels, especially among vulnerable groups such as women or children; it will reduce employment opportunities, especially for young people; it will lower tax revenues, especially for countries that depend on commodity exports; it will increase debt burdens, especially for countries that have borrowed heavily during the pandemic; it will exacerbate social unrest, especially in countries that face political divisions or corruption; it will undermine international cooperation, especially on issues such as climate change or health security.

To avoid a deeper slump or prolonged stagnation, policymakers need to act swiftly and decisively to support economic recovery while maintaining price stability. They need to balance fiscal stimulus with fiscal discipline; they need to balance monetary easing with monetary credibility; they need to balance structural reforms with social protection; they need to balance domestic policies with global coordination.

The global recession is not inevitable but it is highly likely unless bold actions are taken soon.

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