The Fund says world economy faces several shocks, including war in Ukraine
WASHINGTON – The International Monetary Fund said global economic growth is slowing and the prospects for a quick recovery are bleak.
The IMF expects global economic growth, which was 6.1 percent last year, to be 3.2 percent this year, 0.4 percentage points lower than its April forecast.
“An uncertain recovery in 2021 was followed by a dismal development in 2022, as risks began to materialize, – the IMF said, – Global output declined in the second quarter of this year because of recessions in China and Russia, and consumer spending in the U.S. fell short of expectations.”
The Washington-based international financial agency said that “the world economy, already weakened by the pandemic, suffered several shocks”. These are inflation, which was higher than expected worldwide, but especially in the U.S. and major European countries; a slowdown in China due to the COVID-19 outbreaks and lockdowns, which was also stronger than expected; and the negative effects of the Russian war in Ukraine.
The IMF said that prices of consumer goods, especially food and energy, are rising globally.
Growth this year is expected to be 6.6 percent in advanced economies and 9.5 percent in developing countries. Both are about 0.1 percentage points higher than in the IMF’s previous forecast.
The Fund noted that the war in Ukraine “may lead to a sudden disruption” to Russian natural gas exports to European countries, and “inflation may be harder to reduce than expected” if employers cannot find enough workers to meet their staffing needs or if inflation rises at a higher rate than expected.
The IMF said a “plausible alternative scenario” to its already downgraded forecast would be a global economy “in which risks materialize, inflation rises further, and global growth declines” to about 2.6% in 2022 and 2% in 2023.
“As rising prices continue to push down living standards around the world, curbing inflation should be a top priority for policymakers,” the IMF said.
The IMF forecast came as the U.S. central bank, the Federal Reserve, began a two-day meeting that is expected to result in the announcement Wednesday of another 0.75 percentage point key rate hike in an effort to curb inflation in the United States, the world's largest economy.
With consumer price growth at an annualized rate of 9.1% in June, the fastest pace in four decades, the Fed has already raised its key rate from near zero to 1.6%. It is expected to reach 3.4% by the end of the year.