IMF says world economy about to hit recession

The International Monetary Fund (IMF) warns the world economy will be in a recession as it downgraded global growth projections for next year. The IMF warned policymakers that a worldwide recession will occur if the fight against inflation is mishandled. The IMF’s bleak assessment comes after reviewing the World Economic Outlook report. According to The Straits Times, the report was published as the world’s top economic officials came to Washington for the annual meeting of the IMF and World Bank.

As the war between Russia and Ukraine has disrupted supply chains and led to surges in food and energy prices over the past year, central bankers have raised interest rates to cool off their economies. But, the IMF warns it could trigger a cascade of recessions in wealthy nations and debt crises in poor ones. The downgrade in global economic growth from 3.2 per cent to 2.7 per cent has not helped matters. IMF chief economist, Pierre-Olivier Gourinchas, says the global economy is weakening.

“In short, the worst is yet to come, and for many people, 2023 will feel like a recession. The risks are accumulating. We’re expecting about a third of the global economy to be in a technical recession.”

Such a technical recession means that an economy shows a contraction for two consecutive quarters, according to the IMF. Jamie Dimon, CEO of JPMorgan Chase, says that the US will likely be in “some kind of recession six to nine months from now.”

Statements from such CEOs indicate that Wall Street and Corporate America are preparing for an economic stalling. And, some private forecasters predict an even worse economic situation. Bloomberg’s survey showed a median economist expectation of 2.9 per cent global growth this year and 2.5 per cent next year as the euro area posts .2 per cent growth for next year with Eastern Europe seeing an output fall.

In the US, inflation and rising interest rates are decreasing consumer spending power, with housing activity also declining due to increasing mortgage rates. The IMF report also detailed how the economies of the US, China and the 19 nations that use the euro are all in different states of decline, affecting the worldwide economy. The IMF urged policymakers in those countries to conserve their reserves of foreign currencies for when financial conditions worsen.