IMF Downgrades its Global Economy Outlook Due to Surging Inflation

IMF

IMF

The International Monetary Fund (IMF) on Tuesday downgraded its global economic outlook for this year and next because of rising inflation and severe economic slowdowns in the United States and China.

Since April, IMF chief economist Pierre-Olivier Gourinchas has said, “The outlook has darkened significantly.” It’s barely been two years since the last recession, yet the world is on the verge of a new one.

US, China and Eurozone economies are all “stagnating,” he told a briefing. “This has important consequences for the global outlook,” he said.

For the first time since April, the International Monetary Fund has lowered its forecast for global GDP growth in 2022 by four-tenths of a percentage point.

Reports on the pandemic downturn’s “tentative recovery” last year have been followed by more gloomy developments in 2022, the report stated.

According to the International Monetary Fund (IMF), “Several shocks have hit a world economy already weakened by the pandemic, including the war in Ukraine which has driven up global prices for food and energy.”

Economic activity has been stifled in China by 19 lockdowns and a worsening real estate crisis, while the Federal Reserve has been aggressively raising interest rates.

IMF officials have issued a stark warning about the outlook, saying that “risks are overwhelmingly tilted downward.” If these risks come to fruition, it could send global economic growth into one of its worst slumps in a half-century.

The fallout from the conflict in Ukraine, including the possibility of Russia cutting off natural gas supplies to Europe, as well as a food shortage due to the chokehold the war has on grain supplies, could lead to famine, according to experts.

Warnings from the World Economic Organization (WEO) about the potential for “stagflation” if “shocks are sufficiently severe” were issued.

As a result, growth would be slowed to 2.0 percent by 2023. Five times since 1970 has there been a decrease in the global growth rate.

According to Gourinchas, we’d be “getting really close to a global recession” if that happened.

For governments, reining in increasing prices, even at the cost of hurting their population, is the most important thing they can do, according to a report from the International Monetary Fund.

“The synchronized measures by major central banks to respond with the inflation danger is historically unprecedented, and its ramifications are expected to bite,” Gourinchas wrote in a blog post about the research.

Delaying the introduction of a more restrictive monetary policy will only worsen the current economic misery, he said.

According to the International Monetary Fund, consumer prices will rise 8.3% this year, which is nearly a full percentage point higher than previously predicted, while emerging market economies face an increase of 9.5%.

In addition, “additional supply-related shocks to food and energy prices from the conflict in Ukraine might dramatically boost headline inflation.”

Poor countries, where food accounts for a bigger percentage of household expenditures, would feel the brunt of this more acutely.

A little better than projected, the global economy has “shrunk in the second quarter — the first contraction since 2020,” the International Monetary Fund (IMF) reported.

In most nations, including the United States and China, the International Monetary Fund (IMF) reduced growth predictions by more than a point.

A recession, defined as two consecutive quarters of negative growth, may have already occurred, according to the fund, which now expects only 2.3% growth in the United States this year.

Concerns over the property market and the “worsening crisis” in China’s Covid industry are projected to lead to a significant slowdown in China’s economy in 2022, with growth averaging just 3.3% — the lowest rate in more than four decades except for the 2020 pandemic crisis.

Global supply chain disruptions and domestic expenditure declines are hurting China’s trading partners as a result of the country’s economic slowdown, according to a research from the International Monetary Fund (IMF).

According to the World Economic Prognosis (WEO), Italy, Brazil, Mexico, and Russia have all seen their growth forecasts upgraded despite the bleak outlook. Russia, which is anticipated to contract, is benefiting from increased oil prices due to Western sanctions.

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