World Economy

Fear of Great Deflation

Fear of Great DeflationFear of Great Deflation

A significant decline in commodity prices in recent weeks — coupled with a worsening global economic outlook and major corrections in global equity markets — could result in a Great Deflation, namely a vicious circle of price/asset deflation around the world, Arab News reported Sunday. The risk of such a scenario occurring is rising as crude oil prices tumbled last week and major equity markets witnessed a significant correction. If these trends continue and unless governments around the world stimulate domestic demand through additional government spending, a Great Deflation is likely to occur and significantly worsen the already weak outlook for the global economy.