The global economy has suffered multiple shocks

The global economy has been rocked by multiple crises, raising fears of recession, unemployment, hunger and plunging stock markets.

At the root of this suffering is a force so fundamental that it hardly needs to be mentioned again — the pandemic. That force is far from exhausted, leaving policymakers facing serious uncertainty. Their policy tools are better suited to a more typical recession than a rare combination of slowing growth and soaring prices.

Major economies, including the United States and France, released the latest inflation figures, showing prices for all goods rose in June at the fastest pace in 40 years.
The grim numbers increase the likelihood that central banks will act more aggressively to raise interest rates to slow rising prices — a move expected to wipe out jobs, batter financial markets and threaten debt crises in poor countries.

On Friday, China, the world’s second-largest economy, reported that its economy grew just 0.4 percent from April to June from a year earlier. That is a surprisingly weak performance by the standards of recent decades and leaves a bleak outlook for dozens of countries that trade heavily with China, including the US. It adds to the recognition that the global economy has lost a vital engine.

Fears of slowing economic growth and rising prices have even brought back the dreaded word “stagflation,” which frequently entered the lexicon of ordinary people in the 1970s, the last time the world faced a similar problem.

Most of the challenges tearing the global economy apart have been triggered by the world’s response to the spread of novel Coronavirus and the ensuing economic shock, and have been exacerbated by the recent turmoil — Russia’s disastrous attack on Ukraine — which has reduced food, fertilizer and energy supplies.

“Outbreak itself disrupts the production and transportation of the goods, this is the initial position, inflation and disrupting the way we work and place, our education child’s way and place, and the global migration patterns,” university of Texas at Austin, Julia coronado, an economist at the brookings institution in Washington last week said at a discussion. “Almost everything in our lives was disrupted by the pandemic, and then the war in Ukraine.”

It was the outbreak that prompted governments to impose lockdowns to limit its spread, hampering factories from China to Germany to Mexico. When people were confined to their homes, they ordered record amounts of goods — sporting equipment, kitchen appliances, electronics — exceeding production and transportation capacity, leading to “big supply chain disruptions.”