Fund slashes forecasts as US, China and eurozone stall and inflation beats expectations
The International Monetary Fund has warned that the global economy could soon be teetering on the brink of recession amid evidence that the world’s three biggest economies are all stalling and inflation is higher than previously forecast.
In a downbeat update to its April world economic outlook (WEO), the IMF slashed its growth forecasts in both 2022 and 2023 – and raised the prospect of a more pronounced slowdown.
The head of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that the global economic outlook “has darkened significantly,” emphasizing that, regarding a global recession, “we cannot rule it out.”
IMF Says Global Economic Outlook ‘Has Darkened Significantly’
Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), discussed the global economic outlook and the prospect of a global recession in an interview with Reuters Wednesday.
Commenting on the global economy, the IMF managing director said:
The outlook since our last update in April has darkened significantly.
She cited several factors, including a more universal spread of inflation, more substantial interest rate hikes, China’s economic growth slowdown, and mounting sanctions related to the Russia-Ukraine war.
In April, the IMF slashed its global growth forecast from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This was “0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January,” the Fund noted at the time.
The IMF will be cutting its global growth forecast further late this month, Georgieva noted, adding that it will be the third downgrade this year.
Global Recession Cannot Be Ruled Out
When asked about the prospect of a global recession, the IMF managing director said:
The risk has gone up so we cannot rule it out.
“We are in very choppy waters,” she continued. Investors are becoming increasingly concerned about recession risks.
Georgieva noted that recent economic data showed that some large economies, including those of China and Russia, had contracted in the second quarter. She cautioned that the risks were even higher in 2023.
The IMF boss said:
It’s going to be a tough ’22, but maybe even a tougher 2023 … Recession risks increased in 2023.
Georgieva believes that slower economic growth may be a “necessary price to pay,” citing the urgent and pressing need to restore price stability.
She opined: “We need to create the same strong level of coordination between central banks and finance ministries so they provide support in a very targeted way … and don’t weaken what monetary policies are aiming to achieve.”
In June, World Bank President David Malpass warned about a possible global recession. “For many countries, a recession will be hard to avoid … This is the sharpest slowdown in 80 years,” he said.
What do you think about the comments by IMF Managing Director Kristalina Georgieva? Let us know in the comments section below.
Kristalina Georgieva cites Russia’s war in Ukraine and cost pressures caused by China’s zero-Covid policies
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The IMF’s managing director, Kristalina Georgieva, said it is becoming harder for central banks to bring down inflation without causing recessions.
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The 190 countries that are members of the IMF are entitled to allowances in strong currencies which they do not have to pay back. This device is called Special Drawing Rights. To this we must add loans that the IMF can grant to a country calling for help. Loans must be repaid with interest and are tied to conditions that reinforce neoliberal policies.
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