IMF paints bleak global economic outlook
Global economic growth is slowing and the outlook for a quick recovery is bleak, the International Monetary Fund said on Tuesday.
The IMF said it expects growth to slow from 6.1% last year globally to 3.2% this year, four tenths of a percentage point lower than expected in april.
“A tentative recovery in 2021 was followed by increasingly bleak developments in 2022 as risks began to materialize,” the IMF said. “Global output contracted in the second quarter of this year, due to slowdowns in China and Russia, while US consumer spending came in below expectations.”
The Washington-based international financial agency said “several shocks have hit a global economy already weakened by the pandemic: higher-than-expected inflation around the world – particularly in the United States and major European economies – triggering tighter financial conditions; a worse-than-expected slowdown in China, reflecting COVID-19 outbreaks and lockdowns; and other negative fallout from [Russia’s] war in Ukraine.
The IMF said the price of consumer goods, especially food and energy, is rising worldwide. The cost is expected to rise 6.6% in advanced economies this year and 9.5% in emerging and developing economies, both figures up nearly a full percentage point from the previous projection of the IMF.
“Risks to the outlook are extremely on the downside,” the IMF said.
He said the war in Ukraine “could lead to a sudden halt” in Russian natural gas exports to European countries and that “inflation could be harder to reduce than expected” if employers do not find enough workers to meet their labor demands or if inflation rises. at a faster rate than expected.
The IMF said a “plausible alternative scenario” to its already cut forecast would be a global economy “in which risks materialize, inflation rises further and global growth declines” to around 2.6% and 2% for cent in 2022 and 2023, respectively, numbers that would put growth in the bottom 10% of outcomes since 1970.
“With rising prices continuing to weigh on living standards around the world, controlling inflation should be the top priority for policymakers,” the IMF said.
The IMF forecast came as policymakers at the US central bank, the Federal Reserve, began two days of meetings in Washington on the hope that they would announce another three-quarters of a percentage point hike in the rate of interest on Wednesday. Fed benchmark, an effort to rein in runaway inflation in the United States, the world’s largest economy.
With U.S. consumer prices soaring 9.1% year-over-year in June — the fastest pace in four decades — the Fed has already raised its key rate this year by nearly zero percent to 1.6% and expects to end 2022 at 3.4%.
Fed interest rate increases ripple through the US economy, with higher borrowing costs for auto loans and consumer goods. By raising the cost of borrowing, the Fed expects consumers and businesses to cut back on spending and thus help curb inflation.