The World Bank has revealed why the Central Bank of Nigeria and other central banks across the World must prepare for an impending recession in 2023.
The World financial institution had issued an impending recession alarm following the simultaneous rise of interest rates.
The CBN during its last Monetary Policy Committee meeting which was held in Abuja was reported to have increased its benchmark interest rate to 14 per cent from 13.5 per cent.
As disclosed by the World Bank Group President, David Malpass via a report titled, ” Risk of Global Recession in 2023 Rises Amid Simultaneous Hikes” the reoccurring increase of interest rates in response to inflation will push the world economy towards another global recession in 2023.
The decision would also lead to a string of financial crises in emerging markets and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.
The study relies on insights from previous global recessions to analyze the recent evolution of economic activity and presents scenarios for 2022 to 24.
The report said central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decades – a trend that is likely to continue well into next year.
“Yet the currently expected trajectory of interest-rate increases and other policy actions may not be sufficient to bring global inflation back down to levels seen before the pandemic. Investors expect central banks to raise global monetary-policy rates to almost four per cent through 2023 – an increase of more than two percentage points over their 2021 average,” it said.
Unless supply disruptions and labour-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about five per cent in 2023-nearly double the five-year average before the pandemic, the study finds.
