Although Bangladesh may not go into recession, the country is significantly prone to many of the recessionary risks if appropriate steps are not taken to diversify the export product and basket and increase remittances through formal channels, said the International Chamber of Commerce-Bangladesh (ICCB) on Thursday.

The ICCB in its latest editorial also highlighted the importance of taking appropriate measures to streamline public sector expenditures, rationalize mega infrastructure and other projects and undertake effective financial sector reforms.

The global economy surpassed $100 trillion for the first time in 2022, but is likely to stall in 2023 due to last year’s multifaceted shocks and challenges.

The three main global growth engines — the US, Europe and China– will experience slower growth in 2023, according to the editorial.

In Bangladesh, according to experts, a major effort should be directed toward strengthening macro-prudential regulations and building foreign exchange reserves.

Fiscal measures should carefully regulate withdrawal of fiscal support measures while ensuring consistency with monetary policy objectives.

A credible medium-term fiscal plan should be in place, among others, to provide targeted relief to vulnerable households.

The supply side measures should aim to ease labor-market constraints, increase labor-force participation, reallocation of displaced workers and reduce price pressures.

Effective policy coordination will be important in increasing food and energy supply. For the energy sector, policies should accelerate the transition to low–carbon energy sources and introduce measures to reduce energy consumption to face climate change.

Higher-than-expected and persistent inflation, tightened financial conditions, Russia’s war against Ukraine, lingering COVID-19 pandemic and supply-demand mismatches have further slowed the global economic outlook, according to the editorial of the ICCB.

IMF Chief Kristalina Georgieva warns that one-third of the world economy could be in recession in 2023. Even countries that would not be in recession, would feel the recessionary pressure for millions of people, she adds.

Russia’s invasion of Ukraine not only threatens the lives of millions of Ukrainians but has also accelerated a series of cascading and interconnected global crises in food, fuel, and energy, resulting in rising cost of living further adding inflationary pressure in many countries.

In addition, extreme weather conditions due to climate change pose downside risks to the global economic outlook, and increasing energy prices also hamper the path toward a green transition, said ICCB.

The persisting global challenges have caused rising debt vulnerabilities and hampered the way toward recovery, which further impacted the vulnerable groups, especially low-income and developing countries.

The largest slowdown of global trade in generations, significant decline in FDI, private capital flows and remittances are also contributing to global recession.

The likely recession in the developed world will spur capital outflows from the developing countries forcing them to devalue their currencies, thus adding to rising inflation and consequently to increasing interest rates.

According to a recent comprehensive World Bank study, the risk of global recession in 2023 has risen sharply as the central banks across the countries have hiked interest rates in response to inflation.

Yet the indications so far show these policy actions may not be sufficient to bring global inflation back to normal.

Indications are there that global consumer confidence has suffered a sharp decline. It is apprehended that unless supply disruptions and labor market pressures subside, the global core inflation rate may remain high.

At the global level, the key will be to strengthen global trade networks to alleviate supply bottlenecks.

Now is the time to promote a rules-based international economic order that prevents the threat of protectionism and fragmentation that would further disrupt trade networks, said the ICCB.

In line with current global economic challenges, G20 members have reaffirmed their commitment to well-calibrated, well-planned, and well-communicated policies to support sustainable recovery and mitigate scarring effects to support strong, sustainable, balanced, and inclusive growth.

In this regard, the G20 has reaffirmed the importance of macro-policy cooperation to preserve financial stability and long-term fiscal sustainability and safeguard against downside risks and negative spillovers.

Amazon founder Jeff Bezos, speaking to CNN recently warned consumers and businesses that they should consider postponing large purchases during the holiday season to keep their cash safe as an economic recession might be in the offing.

While the central banks should continue with their efforts to control inflation to help anchor inflation expectations and reduce the degree of monetary tightening, concerted actions are needed by other policymakers as well.