IMF warns of higher recession risks and darker global outlook

On Thursday, two leading economists painted a very different picture of what the global economy will look like in the coming years.

International Monetary Fund Managing Director Kristalina Georgieva told an audience at Georgetown University on Thursday that the IMF is once again lowering its projections for global economic growth in 2023, reducing world economic growth to $4 trillion by 2026. Used to be.

“Things are more likely to get worse before they get better,” he said. Russian invasion of Ukraine The event, which began in February, has dramatically changed the IMF’s outlook on the economy. “Recession risks are mounting,” she said, calling the current economic environment a “period of historical fragility.”

Meanwhile, US Treasury Secretary Janet Yellen, at the Center for Global Development on the other side of the city, focused on how the US and its allies can contribute to making long-term investments in the global economy.

He called for ambitious policy solutions and did not use the word “recession” even once. But despite Yellen’s more measured approach, she said “the global economy continues to face significant uncertainty.”

The war in Ukraine has raised food and energy prices globally – sharply in some places – with Russia, a major global energy and fertilizer supplier, exacerbating the conflict and vulnerabilities of global food and energy supplies. is exposing.

Additionally, the ongoing COVID-19 pandemic, rising inflation and deteriorating climate conditions are also affecting world economies and exacerbating other crises, such as high debt levels by low-income countries.

Georgieva said the IMF estimates that countries that make up a third of the world economy will see an economic contraction for at least two consecutive quarters this or next year, adding that the institution has already slashed its global growth projections three times. . It now expects 3.2% for 2022 and now 2.9% for 2023.

The bleak IMF projections come as central banks around the world raise interest rates in hopes of tackling rising inflation. The US Federal Reserve has been the most aggressive in using interest rate hikes as an inflation-mitigating tool, and central banks from Asia to England began raising rates this week.

“Tackling monetary policy too much and too fast – and doing so in a synchronized manner across countries – could push many economies into prolonged recession,” Georgieva said. Maurice Obstfeld, an economist at the University of California, Berkeley, recently wrote that too much tightening by the Federal Reserve “could drive the world economy into an unnecessarily harsh contraction.”

Yellen agreed on Thursday that “macroeconomic tightening in advanced countries could lead to international spillovers.”

The speeches by the two economists come ahead of next week’s annual meetings of the 190-nation IMF and its partner agency, the World Bank, which intend to address a multitude of risks to the global economy.

Georgieva said the fund’s updated World Economic Outlook to be released next week cuts growth figures for the next year.

Many countries are already seeing the major effects of Ukraine’s invasion on their economies, and the IMF’s dire projections are in line with other forecasts of a growth slowdown.

The Organization for Economic Co-operation and Development said last week that the war would cause the global economy to lose $2.8 trillion in output in 2023.

guesses come after The OPEC+ alliance of oil exporting countries on Wednesday decided to sharply cut production Oil prices plummeted in a move that could deal another blow to the struggling global economy and raise politically sensitive pump prices for US drivers just ahead of major national elections in November.

Yellen said that as many developing countries are facing challenges all at once, from debt to hunger to exploding costs, “this is not the time for us to back down.”

“We need ambition in updating our approach to development financing and delivery. And we need ambition to meet our global challenges.”