IMF boss says outlook dark for economy

The head of the International Monetary Fund has warned that recession risks across the globe are rising as a toxic mix of inflation, higher borrowing costs and lingering supply chain disruptions continue to batter the global economy.

Kristalina Georgieva, the IMF’s managing director, said that as a result of these persistent problems, the international body would downgrade its growth projections for next year in an upcoming report, one that she said would paint a dark picture of the looming economic threats.

The assessment is the latest example of how last year’s optimism for a strong global recovery has been replaced by worries about rapid inflation, Russia’s war in Ukraine and an ongoing pandemic.

“Multiple shocks, among them a senseless war, changed the economic picture completely,” Georgieva said in remarks prepared for a speech at Georgetown University in the United States. “Far from being transitory, inflation has become more persistent.”

The IMF has been steadily downgrading its forecasts in recent months and currently projects global output to grow 2.9 per cent next year. That projection will be lowered when the fund releases its closely watched World Economic Outlook report on Tuesday as the annual meetings of the IMF and World Bank begin in Washington.

Policymakers attending the meetings will be working to better co-ordinate their responses to inflation pressures and recession risks while preparing for the repercussions of higher interest rates.

“For major economies facing high inflation, the immediate task is to return to an environment of stable prices,” Treasury Secretary Janet Yellen said in a speech at the Centre for Global Development on Thursday. “But it is important to recognise that macroeconomic tightening in advanced countries can have international spillovers.”

Yellen added that the IMF and multilateral development banks need to be ready to assist developing economies if debt crises emerge.

The IMF estimates countries accounting for about one-third of the world economy will have at least two consecutive quarters of contraction in 2022 or 2023.