Recession Will Become Certain If Gaza War Spreads Through the Region
I said, “I do not expect a global recession, but it would be a high possibility if the Russia-Ukraine war escalates further” in a presentation I delivered last month.
Now, we have a greater and more dangerous one threatening the Middle East . If the war there gets hotter, recession will be inevitable.
The decision makers in both the EU and the US are heavily criticised for openly supporting Israel while ignoring Palestine. Meanwhile, according to recent poll results from key states, Biden is trailing Donald Trump by 10 points, which goes to show that the US presidential elections will be quite stormy in terms of both the process and the outcome.
As for the economic aspect of America’s future, the Fed Chair Powell has stated that they might hike rates again if they feel the need to get rid of inflationary effects. But the US economy does not currently indicate a complete recovery. Also considering fact that global inflation expectations have been going down, the United States is likely to experience an inflation level of approximately 2 to 3% in 2024. Over the next two months, we will see whether an additional rate increase will be necessary for this. It is also only a matter of time until we see world trade forecasts are revised downwards.
However, a sudden rise in oil and food prices due to the war might disrupt these plans. Increasing interest rates alone would not help fight such sudden and rapid price hikes. I also expect that contraction concerns will cause monetary authorities to have hesitations about how to react therefore they will be late in implementing necessary countermeasures in time. However, if they intervene in the contraction of the economy too sharply, again, a recession will be inevitable. If they do, both inflation and growth rates for two years will be quite volatile. Moreover, if the US naval forces become a permanent presence in the Mediterranean and creates instability in the region, as they did in Iraq and Afghanistan in the past, the terrorism and paramilitary activities that operated after 2015 may operate again.
When watching international news channels, I see they also have violent discussions just like the ones we have on our networks. A moderator asked, “What is needed for world peace?” on one of those channels and no was able to provide a clear answer to it for 45 minutes. They eventually agreed that war is not the answer. Apparently, Israel will not abandon its desire to keep expanding its territory anytime soon, and the State of Palestine will exist only on paper. Sadly, in our age, we still witness barbarism in both the north and the south that we thought we would never witness again.
