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Stagflation

Stagflation is an economic condition that combines decreased economic activity (stagflation) and high levels of inflation at the same time. This occurs when a country's GDP declines and at the same time sees price levels rise.

Stagflation can occur as a result of the interaction of some economic factors, like:

  • Decreased production and economic activity
  • Increased production costs
  • Decreased consumer demand
  • Increased structural cost
  • Structural inflation
  • High commodity prices

Examples of stagflation in history include:

  • Oil crisis 1970-1975
  • 2008 subprime crisis
  • 2010 European debt crisis
  • 2011 Greek debt crisis

World Bank forecasts indicate that the global growth rate is expected to slow by about 2.7% between 2021 and 2024, due to rising energy and food prices, in addition to disruptions in supply networks and trade movement as a result of the war, and the necessary measures that are currently being implemented to restore interest rates to their rates. Natural.

To confront stagflation, a set of measures must be taken, such as:

  • Limiting the damage to those affected by the war in Ukraine.
  • Facing sudden jumps in energy and food prices.
  • Intensifying efforts to reduce debt burdens.
  • Strengthening health preparations and efforts to contain the Corona virus.
  • Accelerating the transition to low-carbon energy sources.

In light of the factors mentioned in the article, it can be said that the possibility of a stagflation scenario occurring in the future is possible, especially with the continuation of the war in Ukraine, high inflation rates, and increasing interest rates.

However, taking necessary measures by governments and central banks can help reduce risks and prevent stagflation.

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