Monetary and fiscal policy moves in advanced economies may drag the global economy into recession and protracted stagnation, inflicting more pain than the 2008 financial crisis and the 2020 COVID-19 shock, a United Nations agency warned on Monday.

Central banks in advanced economies have failed to tame inflation and generate healthier growth in a decade of ultra-low interest rates, the UN Conference on Trade and Development (UNCTAD) said in its annual report.

Counting on them to hike interest rates while avoiding recession now is an "imprudent gamble," the report added.

It cautioned that there could be economic stagnation and instability caused by excessive monetary tightening, forecasting that the U.S. Federal Reserve's rate hikes this year will slash future income for developing countries, apart from China, by $360 billion.

The rate increases have spurred global investors to chase more attractive dollar-denominated products for higher returns, which in turn boosted the U.S. dollar.

Around 90 developing countries' currencies have weakened against the greenback this year and their governments have poured $379 billion of reserves to defend their currencies so far this year, UNCTAD data showed.

The emerging market has accumulated a lot of dollar-denominated debt since 2014. As a result, they have to pay back more when the dollar appreciates.

Countries that are already under heavy debt burden before the COVID-19 pandemic, like Zambia and Sri Lanka, are taking some of the worst hits, the report noted.

UNCTAD expects the world economy to expand 2.5 percent this year and further slow to 2.2 percent in 2023.

"We have the tools to calm inflation and support all vulnerable groups. This is a matter of policy choices and political will," said UNCTAD Secretary-General Rebeca Grynspan.

UNCTAD is a permanent UN agency that works to maximize trade and investment opportunities for developing countries, and to help them meet the challenges brought about by globalization and integrate into the world economy more fairly.