US Politics

Premarket: The world may dodge another recession. But risks are growing

Premarket: The world may dodge another recession. But risks are growing

World Bank President David Malpass told journalists that “severe overlapping crises” are weighing on the recovery.

“There’s Covid-19, inflation and Russia’s invasion of Ukraine,” he said on Monday.

Developing countries, many of which are facing high levels of debt and a plunge in the value of their currencies, as well as soaring food prices, are of particular concern, he added.

Breaking it down: Around the world, engines of growth are sputtering as prices rise and the war in Ukraine wreaks havoc on strained supply chains.

Europe, which relies heavily on Russia to meet its energy needs, is especially exposed. There, much could depend on Russian President Vladimir Putin’s next move. If supplies of Russian natural gas to Germany were suddenly cut off, Europe’s biggest economy would lose a shocking $238 billion in economic output over the next two years, the country’s forecasters have said.In the United States, inflation has hit a level not seen in four decades. That’s forced the Federal Reserve to consider an aggressive pullback of its pandemic-era support for the economy, boosting fears that it could hike interest rates so much that it causes a recession.

And China saw retail sales plunge 3.5% in March from a year ago as tough lockdowns aimed at curbing the spread of Covid-19 weighed on activity in major hubs like Shanghai.

While Europe is the most vulnerable, Goldman Sachs this week put the odds of a US recession at 15% in the next 12 months and 35% within the next 24 months. Japan’s Nomura said Monday that the chances are rising that China falls into a recession this spring.

That’s not all: Smaller countries are also struggling. Many borrowed heavily over the past decade to deal with the effects of the 2008 financial crisis and the pandemic. Now, interest rates are starting to rise, just as the prices of essentials like food and fuel leap.

“I’m deeply concerned about developing countries,” Malpass said. “They’re facing sudden price increases for energy, fertilizer and…

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