prasad20_Richard Baker  In Pictures via Getty Images_UKeconomy Richard Baker/In Pictures via Getty Images

The Global Recovery Winds Down

Misguided policies in China and Europe have compounded the effects of supply-chain disruptions and the war in Ukraine, thus putting an end to the global recovery from the COVID-19 pandemic. With little room for maneuver, policymakers must coordinate fiscal and monetary actions to tame inflation and improve long-term growth.

ITHACA – The post-COVID recovery has run out of steam. The latest update to the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) shows that growth momentum, as well as financial market and confidence indicators, have deteriorated markedly around the world in recent months. And as the global economy stalls amid heightened uncertainty and rising risks, many countries are either in or on the brink of outright recession.

Some wounds have been self-inflicted. Misguided policies like China’s zero-COVID strategy and the United Kingdom’s reckless “mini-budget” have made it harder for policymakers to respond to ongoing supply-chain disruptions and the protracted war in Ukraine. High and persistent inflation worldwide, and the actions central banks have taken to rein it in, are also depressing economic activity, weakening household and business confidence, and roiling financial markets.

In major advanced economies like the eurozone, Japan, and the UK, sluggish and tepid policy responses have compounded the effects of external shocks, knocking growth trajectories off track. Consequently, many developed countries now face the challenges that have long characterized periods of economic and financial stress in emerging-market economies: steep currency depreciations (relative to the US dollar), rising government bond yields, strained public finances, and tightening policy constraints.