Cost-of-living crisis causing global gloom

Grim economic outlook prompts groups to call on IMF, World Bank to intervene

The world's businesses and their customers are increasingly pessimistic about the future, according to a study carried out for British economic newspaper the Financial Times.

The Brookings-FT Tracking Index for the Global Economic Recovery, an analysis of confidence and economic activity in financial markets, found pessimism is growing because of the cost-of-living crisis triggered by more expensive food and fuel resulting from the Russia-Ukraine conflict.

The crisis means people and companies have been earning less but having to pay more for the things they need.

Eswar Prasad, a senior fellow at the Brookings Institution, told the FT that the index shows "a series of self-inflicted wounds" had also been inflicted by governments and enterprises, with supply-chain bottlenecks and poor policy compounding high inflation.

"Growth momentum, as well as financial market and confidence indicators, have deteriorated markedly around the world in recent months," Prasad said.

The index recorded a "mood of mounting economic pessimism "taking hold in major economies, the FT added.

Prasad said that confidence had plummeted during the past year more markedly than it had at any time during the preceding decade.

The twice-yearly index found that the momentum of the world economy to be stalling and that, while the situation was bad in major economies including the United States, the United Kingdom, and China, it was even worse in emerging economies that are more vulnerable to rising food and energy prices.

Prasad said: "Many countries are already in, or on, the brink of outright recession amid heightened uncertainty and rising risks."

The grim news came as the International Monetary Fund and the World Bank each prepared for major annual meetings.

The Guardian newspaper said they will discuss the novel coronavirus pandemic, the Russia-Ukraine conflict, and the climate crisis and their impacts on the global economy, before likely concluding that the entirely world is precariously close to a recession.

Recently, the World Bank said a global recession could plunge 600 million people into extreme poverty by 2030, with individuals having to live on just $2.15 a day.

Kristalina Georgieva, the IMF's managing director, told the BBC the world seems to be heading toward a new age of disruption in which shrinking incomes for workers will mean "even countries where growth remains positive" will "feel like they were in a recession".

Experts have said the world's economy could shrink by $4 trillion between now and 2026, which would be a contraction equal to the size of the mighty German economy.

The desperate situation led 140 civil society groups to send an open letter to the IMF's board ahead of its big meeting, urging it to issue $650 billion in new emergency reserves to help its poorest member nations deal with their financial crises.