The International Monetary Fund (IMF) cut global growth forecasts again on Tuesday, warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.
The IMF expects the world economy to grow 3.2% this year before slowing further to a 2.9% GDP rate in 2023. The revisions mark a downgrade of 0.4 and 0.7 percentage points, respectively, from its April projections.
The Washington-based institute said the revised outlook indicated that the downside risks outlined in its earlier report were now materializing. Among those challenges are soaring global inflation, a worse-than-expected slowdown in China and the ongoing fallout from the war in Ukraine.
“A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide — especially in the United States and major European economies — triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine,” the report said.
The anticipated slowdown would mark the first quarterly contraction in global real GDP since 2020. A “plausible” but less likely alternative scenario could see global growth fall to around 2.6% in 2022 and 2.0% in 2023, the IMF said, putting global growth in the bottom 10% of outcomes since 1970.
The World Bank last month slashed its 2022 global growth outlook to 2.9% from an earlier estimate of 4.1%, citing similar macroeconomic pressures.
This comes as inflation continues to track higher through 2022, led by rising food and energy prices. Global inflation is now forecast to hit 6.6% in advanced economies and 9.5% in emerging market and developing economies this year — an upward revision of 0.9 and 0.8 percentage points, respectively.