IMF cuts global growth forecast for 2023, warns of global recession

The International Monetary Fund Global growth forecast2023 t, A warning of a potential global recession next year.

The IMF cut its global growth forecast to 2.7% in its October 11 World Economic Outlook report. This is down from his July outlook of 2.9%.

“The global economic slowdown is intensifying,” the report said, calling it “the weakest growth profile since 2001” on top of the Great Recession and pandemic.

“The worst is yet to come and 2023 will feel like a recession to many,” said IMF chief economist Pierre-Olivier Grinchas.

The IMF’s 2022 GDP forecast remained steady at 3.2%, down from 6% growth in 2021.

This comes after similar dire predictions from the United Nations, the World Bank, and many global business leaders.

“The slowdown in the global economy has been exacerbated by higher-than-expected inflation, a worse-than-expected slowdown in China due to the COVID-19 outbreak and lockdown, and the effects of Russia’s war in Ukraine.” murmured The IMF as the main reason for the impending economic crisis.

global recession?

More than a third of the global economy will report negative growth for the second quarter in a row next year, “feeling like a recession.”

“The geopolitical realignment of energy supplies as a result of Russia’s war against Ukraine is pervasive and permanent,” the report notes.

Natural gas prices have more than quadrupled since 2021, and prices in Russia are below 20% of 2021 levels.

Food prices have also been pushed up as a result of the civil war, and the IMF says war has the power to “strongly destabilize the global economy,” alongside Europe’s deepening energy crisis.

grocery store
People shop at a supermarket in Montebello, California on August 23, 2022. With food, gas and housing prices skyrocketing and inflation continuing, American shoppers are getting increasingly expensive for groceries and services. (Frederick J. Brown/AFP/Getty Images)

The world’s four largest regional economies – the United States, the European Union, communist China and Japan – will continue to slow as central banks around the world raise interest rates to combat record inflation.

The IMF cut its US growth rate to 1.6% this year, down from its July forecast of 2.3%. Because gas prices across the country started to rise again.

The US economy is expected to grow slightly at 1% in 2023.

The EU, which faces a natural gas and energy crisis due to the war in Ukraine, will see only 0.5% growth in 2023, the IMF said.

The energy crisis looming over Europe is “not a temporary shock,” the IMF said, adding that “winter 2022 will be difficult for Europe, but winter 2023 is likely to be even worse.” said.

China, facing a housing market crisis and a resurgence of lockdown orders that have severely disrupted business operations, will slow to 3.2% growth in 2022 from 8.1% last year.

The United Nations financial institution forecasts China’s growth rate of 4.4% next year, almost half of 2021’s level.

Japan’s growth forecast for 2022 remains at 1.7% from July, according to the IMF.

Growth has slowed to 1.6% in 2023. This is due to rising energy import prices and lower consumption as inflation outpaces wage growth.

Central Banks and Interest Rates

The UN agency said tightening monetary policy around the world to combat inflation and USD against other currencies.

Rising US benchmark interest rates pushed investment away from other countries and made the dollar more valuable.

cash register
A cashier exchanging 50 Euro banknotes for US dollars at a money changer in Rome, Italy, July 13, 2022. (Gregorio Borgia/AP Photo)

The Federal Reserve has aggressively raised interest rates since March of this year and is cracking down on historically high US inflation.

The dramatic rise in interest rates heightened the risk of a sharp economic slowdown and a global recession.

It also makes US exports such as oil and liquefied natural gas more expensive, increasing inflationary pressures.

Maurice Obstfeld, former IMF chief economist and now professor at the University of California, Berkeley, said: told the Associated PressAn overly aggressive Fed could “drive the global economy into an unnecessarily severe contraction.”

Countries in the rest of the world were forced to raise their own interest rates accordingly, straining their economies with higher borrowing costs.

The European Central Bank has started raising its policy rate into positive territory for the first time since 2014.

Meanwhile, the Bank of England this week expanded its bond-buying measures to stem the destabilization of the UK economy and an unwanted surge in bond yields.

The IMF has reported that global inflation will peak at 8.8% in the second half of 2022 and “stay high for longer than previously expected.”

After that, projections predict that global inflation will fall to 6.5% in 2023 and 4.1% in 2024.

IMF says “front-loaded and aggressive monetary tightening” is needed but suggests “massive” recession is not “inevitable” as US and UK labor markets tighten doing.

He also sharply condemned Prime Minister Liz Truss’ failed tax cut proposals, saying that “fiscal policy should not work in conflict with the monetary authority’s efforts to curb inflation”.

The IMF suggested last month that the truss should “re-evaluate” the government’s financial plans.

Epoch Times photo
Prime Minister Liz Truss and Treasurer Kwasi Kwarten during a visit to the construction site of the Medical Innovation Campus in Birmingham, 4 October 2022. (Stefan Rousseau/PA Media)

Pending instability in emerging economies

“The downward-skewed balance of risks is increasing global financial stability risks. Markets are highly volatile,” said Tobias Adrian, Director of the IMF’s Monetary and Capital Division. increase. Press conference October 11th.

He noted that “20 countries are either in default or trading at stress levels,” and that global market conditions have deteriorated significantly in poorer economies.

Adrian said only 29% of banks in emerging markets are able to meet minimum capital requirements, according to the IMF’s global stress test for financial services institutions.

The IMF and World Bank will hold their annual meetings later this week, with many economic advisers and officials from around the world in attendance.

The Associated Press contributed to this report.

Brian Jung


Bryan S. Jung is a New York City resident with a background in politics and the legal industry. He graduated from Binghamton University.