Every day the collapse of the stock market around the world Banks getting into trouble one after another The job cuts made by companies every day The decline in turnover in most countries of the world The world is in trouble due to drought and inflation in some countries. While the world is going through an economic recession, it would be a wonder if the world had not been shocked by the news that this recession is not going to be mild but will continue for another seven years.
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The arrival of Corona gave an unprecedented shock to the economic affairs of the world in the decade of 2020, after which the Russia-Ukraine war started. The supply chain was disrupted, to recover from it, central banks around the world opened their coffers to provide relief to the general public and businesses, due to which, by 2022, the worst phase was behind and the world economy was getting back on track, while inflation reached its peak in many countries, including the United States. In South Asian countries, the economies of Sri Lanka, Pakistan, Bangladesh and Nepal were in trouble. In some countries, people do not even pay for food. There were queues for food. There was a stampede, the stock of foreign currency was running out. There is no currency left even for the purchase of essential items.
In India too, inflation went above the limit set by the Reserve Bank. Most of the world's central banks, led by the US Federal Reserve, started raising interest rates. A rise in interest rates is a constraint on growth. Three years later, the biggest question facing policymakers, industry and students of economics around the world is when will the normal phase of growth return. The World Bank has tried to answer this question in a recently released report. This report follows on from a 2015 study. It examined the causes of the recession in emerging market and developing economies from 2010-15. The study concluded that these economies are trapped in a chronic vicious cycle of weakness. However, the study concluded that one of the causes of recession in these economies is cyclical and can be corrected with appropriate policy interventions. According to the latest report, the ongoing recession in emerging market and developing economies may continue into the 2020s and 2030s, and if developed economies are included, the entire global economy may be on the brink of recession.
The experience of the last two decades has shown that economic crises and recessions have severely dampened growth. To deal with this impending crisis, according to the solution given by the World Bank to the governments of the world, the governments of all countries will have to make concerted efforts at the strategic level to regain the average growth rate of the last decade. While governments will need to revisit their own ten-year best practices on policies across a wide range of economic sectors, the international nature of many development challenges will require stronger coordination of policy initiatives. Re-emphasised broad financing and increased capital inflows from the private sector.
The growth rate of the global economy has been steadily slowing down for more than a decade. While the global economy was growing at a rate of 4.5 percent in 2010, it is projected to slow down to 1.7 percent in 2023. This decline in global growth rate is not due to China, America, India and European Union. Its scope is wide. In eighty percent of developed countries and 75 percent of emerging market and developing economies, the average annual growth rate in 2011–2021 is lower than the average annual growth rate in the decades 2000–2011. Worryingly, this decline in growth cannot be attributed to just one or two incidents.
According to a World Bank report, this decline in growth is due to weakness in almost all the fundamental factors of economic growth. An important factor in this is international trade, which grew at about the same rate as economic growth during 2010–19, while its growth rate was twice the overall global economic growth rate in the two decades 1990–2011. Investment in emerging market and developing economies (private and public combined gross fixed capital formation) is projected to grow by only one and a half percent during 2022-24. This is because of the impact of the recession that started before the pandemic, which is twice the growth in investment in 2000-21. A third important factor is the working age population. The working-age population as a share of the world's total population reached an all-time low in 2017. It has been increasing continuously in the last few decades. All these have a side effect of weakening economic parameters. Progress in health, education and poverty alleviation has been observed to slow in the last decade. According to a World Bank report, the goal of reducing the level of extreme poverty (living on less than $1.90 per day) to three percent by 2030 is very difficult to achieve at current global growth rates.
If all the governments of the world want to break out of this vicious circle, they have to make concerted efforts at the policy level. If this does not happen, the year 2020-30 will be recorded as the 'lost decade' in the economic history of the world. In the first fortnight of March itself, the stock markets around the world collapsed due to the news of the collapse of two major American banks, namely Signature Bank and Silicon Valley Bank. On the other hand, with some uncertainty in a financial institution called Credit Suisse
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