The global economy is on the brink of recession, a finance expert has warned.
During the lockdown, the GDP of countries around the world plummeted as businesses closed and people were forced to stay home to prevent the spread of COVID.
The EU economy contracted by 6.1% but returned to pre-pandemic levels in the summer of 2021.
However, the economic storm clouds are once again gathering and Cormac Lucey, who teaches finance at Trinity Business School, is pessimistic about the outlook for the global economy:
“In the first quarter of this year, there were three very significant shifts in the global economy that I believe bring us much closer to recession,” he said. Down for business.
“The first was that in the United States, inflation continued to strengthen and that reinforced the determination of the Federal Reserve, the American central bank, to stifle inflation by raising interest rates. negative for the global economy.
“The second thing that went wrong was that there was a big outbreak of COVID in China and there they are [still implementing] a zero-COVID strategy. So, yes, they shut down Shanghai in order to stifle the virus there, but it also stifles economic growth there.
“And that, thirdly, leads to a sharp drop in demand and economic growth in the eurozone where we are located.”
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War in Ukraine
Another cause of economic misery is the war in Ukraine; the country is a huge exporter of sunflower oil in particular, but the conflict has hurt its ability to transport products to overseas markets.
Similarly, the sanctions should harm Western economies as well as those of Russia; last month, Taoiseach Micheál Martin admitted that “new sanctions… [will] have an impact on the economy.
EU member states that are particularly dependent on Russian fossil fuels have been particularly cautious about sanctioning Russian energy.
Germany’s central bank has calculated that an immediate ban on Russian gas could cost the country up to 165 billion euros and shrink its economy by 2% from 2021 levels.
It’s a dependency that Berlin is well aware of and the economy minister said such a scenario would lead to “mass unemployment, poverty, people who can’t heat their homes, people who run out of gas”.
Main image: A woman walks past a closed shop on Grafton Street in Dublin. Photo by: Brian Lawless/PA Wire/PA Images