We have been experiencing over 2 years-long pandemic- Covid-19. A war in Europe is pretendedly warning the world with red eyes.
Economic news evidently shows that the world is passing through difficult situations. Already South Asian country like Srilanka is half-collapsed, and a portion of Africa is worried about food.
While there are numerous reasons to overwhelm us, in terms of a country like Bangladesh, it’s normal to think or ask- how close are we to total economic collapse?
Let’s find the answer.
Should we worry about the world economy?
The current situation might not suggest that there will be a recession for sure. But, of course, it indicates that the world economy is waiting with some challenges for us.
Supply chain management
The global pandemic created gaps in the supply chain system. There has been a shortage in supplies and delays. The world was hardly this unpredictable in nearly past decades. Due to cross-boundary policies as a response, several things were not available in time in many significant fields.
Even European Union countries experienced scarcity issues of generic medications. But is it all over? It seems the pandemic yet has its baneful claw to cause more endurance.
There has been the highest inflation frequently in the Eurozone. That reached 7.5% in 2022’s April for the 19-member countries. In March, the figure was 7.4%. Energy costs were also continually on the rise. The price hike in Germany was not so severe since 1981.
The gas price in the US is now astounding compared to the price in January 2021. Home prices are 19.8% inflated (February 2022), and groceries are 10% high (March 2022).
Besides, the fuel prices worldwide increased critically. As a result, the supply of oil, coal, and metals is shorter nowadays.
The status of USD
The reserve of the dollar around the world’s central banks is declining. According to IMF, the overall dollar reserve share is dropped to 59 from 71. It is the lowest in the preceding 25 years.
Surprisingly, the demand is diverted to either gold or other currencies. This financial activity was visible mainly in the countries like Russia, China, and Brazil. On the other hand, El Salvador preferred bitcoin.
The deviation from the dollar to another currency and the petrodollar issue raised due to economic restrictions upon Russia are now fresh issues. These two have a long way to influencing the global economy.
What are the connections?
The adverse and immense interruption in supply influences the primary economic mechanism. Once it emerges, it’s a long brawl to bring back the normal situation. In the process, no economic operations stop though the speed lessens.
Sometimes, new business opportunities crop up. But, that ultimately disturbs the other side of the financial structures overseas.
Inflation prevents people from receiving benefits and even pivotal services. The purchasing power of people and the import ability of a state weaken because of it. That declines the development process and ceases the ability to materialize opportunities drastically. Thus, resources are wasted.
The world has had several economic standards for business in foreign countries worldwide. US dollar has been accepted for almost the last 8 decades as the standard. There is a slight but clear sign to choose and adopt a substitute nowadays by some countries. It won’t be a luxury to think about outcomes from that.
It would be irrational to expect the elimination of the dollar’s dominance overnight. But, the idea indicates how much anarchy the fall of it can create. Naturally, it would make a hollow timeline to bring back the usual pace because everything takes time for adoption.
What to do?
A total economic collapse is not likely to turn up so soon. But, everyone would agree that well-planned mitigation calls for something confining economically soon. Governments should focus on the capital and financial markets and measures to support the enterprises. Tax and Employment are 2 other vital fields to think over in advance.
‘How close are we to total economic collapse?’ isn’t a concern but inception of serious thought. One thing is clear- it’s now inevitable, like climate change and global warming. We’ll find similarities between them as well. Both are the consequences of responsible human intervention, and we are standing so close to the limit.