IMF to cut 2023 global growth outlook, warns of rising recession risk
The International Monetary Fund will cut its global growth outlook for 2023 from an earlier predicted 2.9 percent and is concerned of rising recession risks, the IMF chief said Thursday, as many central banks tighten interest rates to tackle inflation.
In a speech ahead of the release of an updated flagship economic report on Tuesday, IMF Managing Director Kristalina Georgieva pointed to the “darkening” outlook, citing high energy and food prices amid Russia’s war on Ukraine, tighter financial conditions and lingering supply constraints.
Although global growth projections were already downgraded in July to 3.2 percent for 2022 and 2.9 percent for 2023, she said, “We will downgrade growth for next year.”
The Washington-based institution also estimates that countries accounting for about one-third of the global economy will experience at least two consecutive quarters of contraction this or next year.
“Even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices,” she added.
But Georgieva emphasized the importance of central banks continuing to respond to the “stubbornly high and broad-based” inflation even as the moves would lead the economy to slow.
“Not tightening enough would cause inflation to become de-anchored and entrenched, which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people,” she said.
At the same time, tightening monetary policy “too much and too fast,” and doing so in a “synchronized manner” across countries, could push many economies into a prolonged recession, the IMF chief warned.
She also called for joint efforts to support emerging markets and developing economies, as a stronger dollar pushes up costs to service their dollar-denominated debts.
The U.S. Federal Reserve’s aggressive interest rate hikes from earlier this year to tamp down the country’s decades-high inflation have been pushing up the value of the dollar against other currencies.