IMF predicts more volatility as world economy nears recession
The International Monetary Fund forecasts global slowdown and rising inflation rates
A new report by the International Monetary Fund (IMF) has said that the global economy could edge towards a recession as it predicted a slowdown in overall economic growth from 6.1% in 2021 to 3.2% in 2022.
IMF’s report pointed to increasing inflation rates, reduced household spending and the Russian invasion of Ukraine as key factors affecting the economy, which was already weakened by the Covid-19 pandemic as well as problems in the US and China leading to a deepening fear of a global recession.
“The risks to the outlook are overwhelmingly tilted to the downside,” said the IMF. “The baseline forecast is for growth to slow from 6.1% last year to 3.2% in 2022, 0.4 percentage point lower than in the April 2022 World Economic Outlook.”
Taming inflation ‘should be the priority’
Rapidly rising inflation rates and poorly performing digital assets have led to tighter monetary policies and a gloomy outlook in the economic forecast. The IMF’s baseline projection for global inflation sits at 8.3% by the fourth quarter in 2022, up from the 6.9% it estimated in April.
The report suggested that taming inflation should be the first priority for policymakers as the increase in the cost of living as well as a surge in gas and electricity prices needs to be addressed by government policies. It stated that although tighter monetary policy will have economic costs, delaying these policies will only exacerbate them.
“Global inflation has been revised up due to food and energy prices as well as lingering supply-demand imbalances, and is anticipated to reach 6.6% in advanced economies and 9.5% in emerging market and developing economies this year,” added the IMF. “In 2023, disinflationary monetary policy is expected to bite, with global output growing by just 2.9%.”