The head of the International Monetary Fund (IMF) on Wednesday said the outlook for the global economy had “darkened significantly” since April and she could not rule out a possible global recession next year given the elevated risks. IMF Managing Director Kristalina Georgieva told Reuters her group would downgrade in coming weeks its 2022 forecast for 3.6% global economic growth. That would be the third time the IMF has lowered its global growth forecast this year.
IMF is expected to release its updated forecast for 2022 and 2023 in late July, after slashing its forecast by nearly a full percentage point in April.
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Georgieva cited a broad spread of inflation, more substantial interest rate hikes, a slowdown in China’s economic growth and escalating sanctions related to Russia’s war in Ukraine were behind her more dour tone. “We are in very choppy waters,” she said. “The risk [of global recession] has gone up so we cannot rule it out.”
Recent economic data showed some large economies, including those of China and Russia, had contracted in the second quarters, she said, noting the risks were even higher in 2023. “It’s going to be a tough 2022, but maybe even a tougher 2023,” she said. “Recession risks increased in 2023.”
Georgieva said a longer-lasting tightening of monetary policy would complicate the global economic outlook, but added it was crucial to get surging prices under control. Slower economic growth may be a “necessary price to pay” given the urgent and pressing need to restore price stability, she warned.
