In a major new update, the international monetary fund (IMF) has cut its global growth forecasts for the year 2022 and 2023 further warning of a possible worldwide recession. According to the IMF, the two factors that have contributed to a slow economic growth are the Ukraine war and the downside risks of high inflation. In its revised outlook the IMF has said that the global real GDP growth will slow down to 3.2 % in 2022 from a forecast of 3.6% which was issued earlier in April, accumulating to 0.4 % reduction since April 2022.
Further emphasizing on how the world GDP actually contracted in the second quarter due to the downturns in the US, China and Eurozone. Washington based IMF has further predicted the slowdown to continue till next year expecting the growth forecast for 2023 to be pegged at 2.9% from the April estimate of 3.6 % which is 0.7% lower than what had been predicted three months ago. The IMF economic counselor Pierre Oliver Gourinchas further asserted on how the outlook had significantly darkened since April, warning that the world may soon be teetering on the edge of a global recession.
The IMF said that its latest forecasts were extraordinarily uncertain due to various reasons like the downside risks from Russia’s war in Ukraine, spiking rise in energy and food prices which would exacerbate inflation and embed longer term inflationary expectations, further prompting a tighter monetary policy. Other factors that have contributed to the worsening global economy are the renewed Covid-19 outbreaks and lockdowns that might suppress China’s growth and a geopolitical fragmentation that might impede global trade and cooperation. IMF now expects the 2022 inflation rate in developed economies to reach 6.6 % from 5.7% which was predicted in April. While inflation in developing countries for the year 2022 in expected to reach 9.5 % from 8.7% in the month of April.