This report was published in The Hindu on 02/10/2022
The global economy is facing four “unprecedented challenges”, including slowdown in growth in 2022, rising levels of debt and deficit, rising cost of fuel and other commodities triggering a sharp rise in prices, and serious disruption in supply chain due to the ongoing war between Russia and Ukraine, eminent economist Pinaki Chakraborty has said.
Delivering the Prof. K.K. George Memorial Lecture here on ‘Rethinking fiscal rules in times of economic uncertainties’, Mr. Chakraborty said there was looming fear of prolonged global recession. He backed his claim citing the IMF World Economic Outlook in April 2022, which said the war between Russia and Ukraine had delayed the global economic recovery and triggered inflation. The war would also contribute to the slowdown in 2022.
He said the government debt to GDP ratio for advanced economies was hovering around 120% of the GDP. For emerging and middle-income economies, it is around 60%. The pandemic would leave a lasting mark on government finances, he added.
The IMF study had also pointed out that war-induced commodity price rise and broadening price pressure had led to 2022 inflation projections to 5% in advanced economies and 8.7% in emerging market and developing economies.
The developing countries, he said, which spent mostly on health emergency situations during the pandemic were going to face compounded macro challenges due to rising debt levels. Greater international cooperation alone could lead to just and equitable recovery with more resource flow to the poorer regions of the world, he added.
Mr. Chakraborty recalled his long-term association with Prof. George. Finance Minister K.N. Balagopal inaugurated the lecture programme at the Cochin University of Science and Technology (Cusat), which was jointly organised by the Centre for Socio-Economic and Environmental Studies, Kochi, in association with the Centre for Budget Studies, Cusat, and the Gulati Institute of Finance and Taxation, Thiruvananthapuram.