Brace yourselves| Looming Global Recession and possible stagflation, 2022 and beyond.  

The current global events have brought much anxiety and fear to many people. Not only is it indisputable that the world has changed post-Covid 19 both in its social and political character but it has become clear that the global financial markets and global economics will never taste the state of normalcy.  

For some time now, experts in the field of economics and global finance have been discussing the possibilities of a possible recession. It is no surprise this has been happening. Countless countries including South Africa have been experiencing unprecedented levels of high unemployment, rising fuel hikes, and alarming food shortages. 

Youth unemployment continues to be disadvantaged in the labour market

South Africa is no exception to these challenges. According to Statistics South Africa, economic growth has been depressed since 2008 and the youth unemployment rate has steadily increased

Youth in South Africa continue to be disadvantaged in the labour market with an unemployment rate higher than the national average. According to the Quarterly Labour Force Survey (QLFS) for the first quarter of 2022, the unemployment rate was 63,9% for those aged 15-24 and 42,1% for those aged 25-34 years, while the current official national rate stands at 34,5%. Although the graduate unemployment rate remains relatively low in South Africa compared to those of other educational levels, unemployment among the youth continues to be a burden, irrespective of educational attainment. Year-on-year, the unemployment rate among young graduates (aged 15-24 years) declined from 40,3% to 32,6%, while it increased by 6,9 percentage points to 22,4% for those aged 25-34 years in Q1: 2022.

Fuel prices continued to cause pain in April 2022

On the other hand, the motorist in South Africa have suffered petrol hikes in previous months and the expectation of further hikes appears to be inevitable. 

On the 7th of March 2022, South Africa saw a shocking increase in oil prices through the financial markets due to a prolonged period of higher energy costs globally. What could the world be heading to? What is the future of global markets and what should the world prepare for and how? Could there be another economic shock gradually raising its ugly head in 2022 and beyond? Clearly, there is a need for preparation. 

Homin Lee, Asia macro strategist at Lombard Odier stated that the signals are pretty clear about global rapidly rising risks of a recessionary outcome. Concerned experts have even recently been joined by the world’s Premier international credit institution which warns that the worst could be on the horizon and that a recession is highly likely to hit. It is, therefore, no surprise that slow global economic growth is expected and many countries need to start bracing themselves for a recession. This is an unfortunate global economic eventuality that many countries will find hard to avoid. 

Global Stagflation – The Bitterest of Economic Pills. 

Invariably stagflation occurs as a result of slow economic growth, an increase in unemployment, and an increase in inflation. Once business and consumers adjust their behavior to inflation as a long-term problem – stagflation occurs. Signs and economics have warned of possible stagflation that can potentially hit countries globally.

According to the World Bank president David Malpass. “Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies. It’s a phenomenon—stagflation—that the world has not seen since the 1970s,” According to a recently published article titled Global stagflation risks a threat to SA with its challenges. “The double shock of Covid-19 and Russia’s invasion of Ukraine, two events that induced a series of negative aggregate supply shocks that have curtailed production and increased costs, have led to a bout of global stagflation — a situation in which the inflation rate is high, economic growth slows and unemployment remains steadily high.”

The world should brace itself, embrace and prepare for the inevitable global economic catastrophe.