Beijing, 11 Aug (Xinhua) -- The US recession has exacerbated global economic challenges
Xinhua News Agency
After inflation soared to its highest level in 40 years, U.S. gross domestic product fell in a row for the first two quarters of this year, fueling fears of a recession in the United States. Experts from many countries pointed out that the coldness of the US economy is mostly due to its own factors, including monetary policy, and its spillover effect will drag down the global economic recovery and bring severe challenges to developing countries and emerging economies.
This is a profile photo of people in Times Square, New York, ON March 7, 2022. (Photo by Xinhua news agency reporter Wang Ying)
Recessions are inevitable
U.S. gross domestic product fell 0.9 percent annually in the second quarter of this year, contracting for two consecutive quarters, constituting a technical recession in the usual sense, according to the U.S. Department of Commerce.
The Nihon Keizai Shimbun reported that there have been 10 technical recessions in the United States since 1949, and have since been officially recognized as recessions.
For months, U.S. inflation has remained high, consumption has begun to slow, and weaker domestic demand has weighed on the economy's performance, and the economy is expected to perform worse in the next 12 months. Several economists believe that the US economy is deteriorating.
Klaus-Jürgen Gern, an expert at the Gehr Institute for the World Economy in Kiel, Germany, believes that high prices have significantly weakened the momentum of the US economic development. The Fed sharply raised interest rates to combat inflation, dampening consumption and investment, and weakening the economy's performance.
Li Xingyu, executive director of the Socio-Economic Research Center of the Malaysian Chinese Chamber of Commerce and Industry, told Xinhua news agencies in Kuala Lumpur a few days ago: "The risk of a recession in the United States is increasing, and what is uncertain is the duration and severity of the recession." Japanese Nomura Securities economist Aichi Yunomiya believes that the US recession may continue until the end of next year.
Cai Weicai, senior vice president of Kaitai Bank of Thailand, described the current ECONOMIC difficulties of the United States as "freezing three feet is not a day's cold", believing that recent unfavorable factors include the new crown epidemic, the situation in Ukraine and the decline in overseas market demand, and the poor performance of enterprises.
Traders work on the New York Stock Exchange on June 13. (Xinhua News Agency, photo by Guo Ke)
Monetary policy is affecting the world
The U.S. Consumer Price Index (CPI) rose more than 8 percent year-on-year for three consecutive months from March to May, and CPI rose 9.1 percent year-on-year in June, a nearly 41-year high, according to the U.S. Department of Labor. To curb inflation, the Fed announced a 75 basis point rate hike at the end of July, the fourth rate hike this year and the second consecutive 75 basis point hike.
Experts pointed out that in the context of the current new crown epidemic has not completely subsided and countries are trying to maintain economic recovery, the Fed's aggressive interest rate hike has seriously affected the economic recovery of all countries, especially developing countries.
James Morrison, an associate professor of international political economy at the London School of Economics and Political Science, believes that the US response to high inflation is entirely likely to trigger a world economic recession. A slowdown in the U.S. economy will dampen consumption of goods and services related to the world.
Kazakh political economist Peter Svoyk believes that the acceleration of inflation and the tightening of monetary policy in advanced economies have led to increased fears of a world recession, and emerging economies will bear the brunt of it.
Josua Pardide, chief economist of Permata Bank in Indonesia, said that ASEAN countries such as Indonesia regard the United States as an important commodity export market, and exports are bound to be affected by the US economic downturn.
For Sri Lanka, which is facing a crisis of foreign exchange shortages, material shortages, high prices, and tight power supply, the country's economist Molamudali said that the Fed's interest rate hike will make it more difficult for Sri Lanka to attract foreign investment and enter the international market.
Pedestrians walk past a barbershop in Washington, D.C., on Aug. 5. (Xinhua News Agency, photo by Shen Ting)
Policy mistakes harm others and harm themselves
Experts from many countries pointed out that the high inflation in the United States should be attributed to monetary policy, fiscal policy, tariffs on other countries, the implementation of economic sanctions and other factors. Due to the dominance of the US dollar in the global financial system, countries around the world, especially emerging economies, have had to "pay" for their policies.
Lo Yiu-chung, director of the Institute of Governance and Sustainable Development at the National University of Singapore's Business School, believes that the increase in tariffs by the United States out of protectionism has led to an increase in the price of goods and services imported from overseas. "America's irresponsible economic policies not only cause trouble for itself, but also affect the world."
Karim Umda, a professor of economics at the Arab Academy of Science, Technology and Shipping in Egypt, blamed the U.S. economic downturn on policies that created trade disputes and constantly raised interest rates, believing that the U.S. recession would hinder Egypt, the Middle East, and even global development.
Yaroslav Lisowolik, project director of the International Debate Club of the Russian think tank "Valdai", pointed out that the slowdown in economic growth in major developed countries or even falling into recession is largely related to their own economic policies, including the ineffective response to inflation in monetary policy and the inability to effectively balance economic growth and inflation.
Some experts warn that a Fed rate hike will exacerbate turmoil in global financial markets. With the return of international funds to the United States, developing countries will face challenges such as stock market volatility, depreciation of local currencies, rising interest rates on dollar debt, and a sharp increase in the cost of imported raw materials.
José Luis de la Cruz, director of the Mexican Institute of Industrial Development and Economic Growth, said that under the long-term influence of the dollar hegemony, the world has repeated financial and economic crises, making it difficult to develop steadily.
Charles Onunayju, an expert in Nigerian international relations and director of the Nepal-China Research Center, said that subject to the central position of the US dollar in the international financial system, the economic fundamentals and foreign trade activities of African countries are closely linked to the reserves of the US dollar, which means that the United States can transfer inflationary pressures to African countries through monetary policy.