WASHINGTON: The International Monetary Fund (IMF) says the risk of a global recession is increasing. IMF cut growth forecast again on July 26, warning that downside risk from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.
IMF Managing Director Kristalina Georgieva has said that the outlook for the economy is not very good due to the situation created by Russia’s invasion of Ukraine and the Covid epidemic.
He said that the IMF will further reduce its current estimate of growth to 2.9 percent.
World growth had rebounded in 2021 to 6.1% after the COVID-19 pandemic crushed global output in 2020 with a 3.1% contraction.
A new estimate of the growth rate will be released next week.
Georgieva said that it is now necessary to start work to stabilize the global economy.
He said that efforts should be made to deal with the most important issues like inflation.
He said that the mistake of taking the current delicate situation as normal should not be made.
Georgieva said that policy makers should come together and work so that this delicate situation does not turn into a dangerous normalcy.
He said the outlook for the global economy is bleak and the threat of a global recession is increasing.
The IMF said it now expects the 2022 inflation rate in advanced economies to reach 6.6%, up from 5.7% in the April forecasts, adding that it would remain elevated for longer than previously anticipated. Inflation in emerging market and developing countries is now expected to reach 9.5% in 2022, up from 8.7% in April.
“Inflation at current levels represents a clear risk for current and future macroeconomic stability and bringing it back to central bank targets should be the top priority for policymakers,” Mr. Gourinchas said.