According to the head of the International Monetary Fund, the world faces heightened chances of recession. A “fundamental transition” away from relative stability is behind us and planet is entering into an era of deteriorating international relations. The more frequent natural disasters are only worsening the outlook.
Kristalina Georgieva, managing director of the IMF, warned that a sequence of economic shocks had unleashed chronically high inflation, resulting in a global cost-of-living crisis.
In her opening remarks before the Washington-based fund’s annual summit of up to 190 member states next week, she stated that geopolitical fragmentation made it more difficult to deal with the repercussions of Covid-19, Russia’s fight in Ukraine, and climate disasters.
Georgieva cautioned that the IMF would revise the growth projections for next year downward: “The global economy is undergoing a structural shift.”
This would result in “more unpredictability, increasing economic instability, geopolitical conflicts, and more frequent and costly natural calamities – a world in which any nation may be thrown off course more frequently and swiftly.”
IMF has cut its growth projections three times
According to Georgieva, many shocks since the beginning of the epidemic have drastically altered the economic environment. The suggestion is that inflation has become more persistent.
With rising oil prices affecting GDP, She cautioned that the hazards to global economic activity were escalating. She cited China’s troubles, the US economy’s weakening pace, and rising interest rates from key central banks.
The IMF has cut its growth projections three times, to 3.2% for 2022 and 2.8% for 2023. “As you will see in our updated World Economic Outlook next week, we will lower growth for next year,” Georgieva continued. We will also warn that the likelihood of a recession is growing.
The world might lose as much as $4 trillion in worldwide production between now and 2026. This is almost equivalent to the size of the German economy. About a third of the world’s economies will face two consecutive quarters of declining GDP this year or next. And that is a definition for recession.
“Even if growth is robust, it will resemble a recession due to falling real incomes and rising prices,” warned Georgieva.
