GLOBAL ECONOMY: Outlook worsens as global recession looms – IMF

Global Economy: Outlook worsens as global recession looms – IMF

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Still reeling from the COVID pandemic and Russia’s invasion of Ukraine, the global economy is facing an increasingly murky and uncertain outlook, according to the latest report released on Tuesday by the International Monetary Fund (IMF).

The World Economic Outlook Update July 2022: Gloomy and More Uncertain, highlights the significant consequences of the stalling of the world’s three main economic powerhouses – the United States, China and the major European economies.

“The outlook has darkened significantly since April,” said Pierre-Olivier Gourinchas, IMF Economic Counsellor and Director of Research.

“The world may soon be teetering on the edge of a global recession, only two years after the last one”.

The baseline forecast for global growth is for it to slow from 6.1 per cent last year, to 3.2 per cent in 2022 – 0.4 per cent lower than forecast in the last Outlook update in April.

Three key economies

With higher-than-expected inflation – especially in the US and the largest European economies – global financial conditions are becoming tighter.

In the US, reduced household purchasing power and tighter monetary policy will drive growth down to 2.3 per cent this year and one percent next year, according to the outlook.

China’s slowdown has been worse than anticipated amid COVID-19 outbreaks and lockdowns, with negative effects from Russia’s invasion of Ukraine continuing.

Moreover, further lockdowns and a deepening real estate crisis there has pushed growth down to 3.3 per cent this year – the slowest in more than four decades, excluding the pandemic.

And in the Eurozone, growth has been revised down to 2.6 per cent this year and 1.2 percent in 2023, reflecting spillovers from the Ukraine war and tighter monetary policy. “As a result, global output contracted in the second quarter of this year,” said Mr. Gourinchas.

Inflation

Despite the global slowdown, inflation has been revised up, in part due to rising food and energy prices.

This year it is anticipated to reach 6.6 per cent in advanced economies and 9.5 per cent in emerging market and developing economies – representing upward revisions of 0.9 and 0.8 percentage points respectively. And it is projected to remain elevated for longer.

Broadened inflation in many economies reflects “the impact of cost pressures from disrupted supply chains and historically tight labour markets,” the IMF official stated. Learn More /...

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