Moscow: Russia’s Central Bank has warned that the rising debt burden and a sharp surge in inflation during the coronavirus pandemic may spark a severe global financial crisis again, as seen in 2008-2009. Inflation and currency depreciation is becoming widespread in many countries around the globe. The US and European banks anticipate it to be temporary. However, Russia’s Central Bank has forecast that the inflation rate would remain high for a prolonged period and warned that it would spark a financial crisis in 2023.
Just last month, major financial institutions and analysts around the globe mentioned the developments in the Chinese economy, concluding that it would once again hit the global economy. Even the US Treasury Secretary had raised the issue concerning the nation’s debt limit and warned that the United States would have to face a financial crisis. Against this backdrop, the warning from Russia’s Central Bank draws much attention.
The Central Bank of Russia (CBR) has recently published the ‘Monetary Policy Guidelines’ for 2022-2024. The report forecasts alternative scenarios the economy may be subjected to for the next three years. It suggests the coronavirus pandemic is likely to worsen, indicating a steady rise in the inflation rate. In such a scenario, the decisions taken by various central banks to aid the economies would increase the debt burden, Russia’s Central Bank warned. The growing debt burden is anticipated to threaten the global economy and lead to a new financial crisis.
The Central Bank of Russia has said that ‘Although the global economy will appear to make progress in 2022, an economic crisis will hit it in 2023. Also, the blow will be equivalent to the financial crisis of 2008-2009.’ The Russian report noted that in 2023, the growth of global GDP would barely be 1.1 per cent. At the same time, the report also claimed that the rising debt burden would hit emerging economies the hardest.
Last year, Russian President Vladimir Putin had compared the coronavirus-induced crises to the Great Depression of 1929. Besides, the United Nations chief had warned that the world would have to bear the financial consequences of the coronavirus pandemic for decades to come. A report released by the International Monetary Fund (IMF) earlier this year warned that the European countries would have to endure a dual shock of recession.