© Reuters. FILE PHOTO: The logo of the United Nations is seen in the General Assembly hall before heads of state begin to address the 76th Session of the U.N. General Assembly in New York City, U.S., September 21, 2021. REUTERS/Eduardo Munoz/Pool
GENEVA (Reuters) – A U.N. agency warned on Monday of the risk of a monetary policy-induced global recession that would have especially serious consequences for developing countries.
“Excessive monetary tightening could usher in a period of stagnation and economic instability” for some countries, the United Nations Conference on Trade and Development (UNCTAD) said in a statement released alongside its annual report.
“Any belief that they (central banks) will be able to bring down prices by relying on higher interest rates without generating a recession is, the report suggests, an imprudent gamble,” it said.
The report said that higher interest rates, including hikes by the U.S. Federal Reserve, would have a more severe impact on emerging economies, which already have high levels of private and public debt.
“The possibility of a widespread developing country debt crisis is a very real one,” said the report entitled ‘Development prospects in a fractured world’.
Overall, UNCTAD revised down its 2022 growth projection by to 2.5%, from 2.6% estimated in its March assessment. It expects growth of 2.2% in 2023.
The International Monetary Fund also warned last month that some countries may slip into recession next year and revised its growth forecast downwards.
