The United Nations (UN) has warned that the world is “on the edge of a recession” as advanced economies like the United States take aggressive steps to tame inflationary pressures, CNBC reported.

According to the UN Conference on Trade and Development’s (UNCTAD) Trade and Development Report 2022, such a massive global slowdown could potentially inflict worse economic damage than the financial crisis in 2008 and the Covid pandemic in 2020.

“Today we need to warn that we may be on the edge of a policy-induced global recession,” UNCTAD Secretary-General Rebeca Grynspan said in a statement on Monday.

“We still have time to step back from the edge of recession. Nothing is inevitable. We must change course. We call then for a more pragmatic policy mix that deploys strategic price controls, windfall taxes, anti-trust measures and tighter regulations on commodity speculation. I repeat, a more pragmatic policy mix ... we also need to make greater efforts to end commodity price speculation,” she continued.

Meanwhile, Richard Kozul-Wright, director of UNCTAD’s globalization division, said in a statement that “the real problem facing policy makers is not an inflation crisis caused by too much money chasing too few goods, but a distributional crisis with too many firms paying too high dividends, too many people struggling from paycheck to paycheck and too many governments surviving from bond payment to bond payment.”

In the report, the agency urged central banks like the U.S. Federal Reserve “to revert course and avoid the temptation to try to bring down prices by relying on ever higher interest rates.”

Last month, in an effort to tackle inflation levels that are still sitting at roughly forty-year highs, the Fed approved a third consecutive seventy-five-basis-point interest rate hike and suggested that it will keep raising rates well above the current level. With the largely expected move, the central bank took its federal funds rate up to a range of 3 percent to 3.25 percent, the highest level since 2008. Rates are projected to reach 4.6 percent next year, according to a median estimate from the Fed.

The Fed’s interest rate hikes this year are expected to slash an estimated $360 billion of future income for developing nations in Asia, excluding China, while net capital flows to developing countries have turned negative.

“On net, developing countries are now financing developed ones,” the report noted. “Interest rate hikes by advanced economies are hitting the most vulnerable hardest. Some 90 developing countries have seen their currencies weaken against the dollar this year.”

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.