A United Nations (UN) agency warned on Monday (3) of the risk of a monetary policy-induced global recession that would have especially serious consequences for developing countries.
“Excessive monetary tightening can lead to a period of stagnation and economic instability” for some countries, the United Nations Conference on Trade and Development (UNCTAD) said in a statement released alongside its annual report.
“Any belief that they (central banks) will be able to drive prices down by relying on higher interest rates without triggering a recession is, the report suggests, a reckless gamble,” it said.
The report said that higher interest rates, including hikes by the Federal Reserve, will have a more severe impact on emerging economies, which already have high levels of public and private debt.
“The possibility of a widespread debt crisis for developing countries is very real,” said the report titled “Development Prospects in a Fractured World.”
Overall, UNCTAD revised down its growth forecast for 2022 to 2.5% from 2.6% estimated in its March assessment. The expectation is for growth of 2.2% in 2023.
The International Monetary Fund also warned last month that some countries could enter recession next year and revised its growth forecast downwards.
Source: CNN Brasil
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