As the prospects of the global economy remain foggy, analysts have polarized opinions on what to expect in the future. Some of them are more optimistic, while others stress the reasons why the worst is yet to come. For instance, Desmond Lachman, an analyst at the Hill, believes that the grim economic outlook is mainly associated with the West’s attempts to isolate Russia.
He warns investors that storm clouds are gathering over the economy. The consequences of the coronavirus pandemic, which has caused an almost complete shutdown of the Chinese economy, could seem ridiculous compared to Moscow’s refusal to deliver gas supplies to major European countries. Notably, China’s economy is considered the second-largest in the world. However, even its economic woes will not be so devastating to global economic growth. Lachman concludes that the sanction war with Russia stands in the way of global economic prosperity.
The Kremlin has already reduced gas exports to European countries by 20%. The analyst also said that deflationary forces - a strong dollar and falling commodity prices - are now weighing on the US. "They raise serious questions about whether the Federal Reserve is being overly aggressive in its quest to bring inflation under control and whether it is raising the risk of an unnecessarily hard economic landing." Besides, aggressive tightening by the Fed may trigger a wave of debt defaults in emerging market economies.
