A potential war between India and Pakistan could “push the world in to a global recession” in a matter of months, an expert has warned. On Tuesday, India fired a series of missile strikes on Kashmir, with Pakistan vowing to “respond”, triggering fears of an all-out war between the huge nations.
Space race capable India currently hovers around number 5 in the list of the biggest economies in the world, just one place above the UK. In contrast, Pakistan sits around 39th in global rankings, but both countries have huge knock-on effects to the global economy, especially with their strong cultural and now even stronger economic links to the UK. Conflict can have massive effects on markets around the world, and Sky News defence analyst Michael Clarke warned a conflict between India and Pakistan could also spill over into the global economy. He pointed out that global trade is in “such a volatile state at the moment” and says the world may be “hovering on the edge of a recession”.
Mr Clarke added: “If it became a war, even a small war, that would be bad for trade, it would disrupt supply chains.
“So it would be another factor which would likely push the world into global recession in the second half of this year.”
In London, the Bank of England is poised to cut interest rates as the threat of an escalating global trade war looms and the economic growth outlook worsens. Most economists think UK interest rates will be reduced to 4.25% from their current level of 4.5% on Thursday.
Analysts said some members of the central bank’s Monetary Policy Committee (MPC) could push for a larger 0.5 percentage point cut in a bid to reduce borrowing costs further and ease pressure on households and businesses.
It will be the first time the MPC has met to decide monetary policy since US President Donald Trump’s “liberation day” tariff announcements last month.
The decision, along with quarterly economic forecasts, will be delayed by two minutes to honour the silence to mark the 80th anniversary of VE Day – meaning it will be published at 12.02pm, rather than noon.
Some economists have warned that UK economic growth could slow sharply over the next two years because of Mr Trump’s plans, which will directly impact British exporters, but could also weaken spending among households and businesses.
Kallum Pickering, chief economist for Peel Hunt, said the “highly uncertain economic backdrop” would encourage policymakers to intervene by cutting rates on Thursday.
“Although UK economic momentum has picked up appreciably since last December, and has surprised to the upside relative to depressed Bank expectations, rising global growth worries linked to the US’s erratic and risky tariff policies pose fresh risks,” he said.