The International Monetary Fund is downgrading its outlook for the global economy for 2023, bringing up a long list of threats that come with Russia’s war on Ukraine, chronic inflationary pressures, punitive interest rates, and the lingering fallout from the global pandemic.
The 190-nation lender forecast on Tuesday that the global economy will grow just 2. 7 next year, down from 2. 9 it had estimated in July. .
The bleakest prognosis came as no surprise. IMF Managing Director Kristalina Georgieva, pointing to the grim backdrop of the IMF and World Bank’s collapse this week in Washington, warned that “the dangers of recession are increasing” around the world and that the global economy is facing a “period of historic fragility. “
In its most recent estimates, the IMF cut its U. S. expansion outlook. The U. S. forecast is 1. 6 this year, from a July forecast of 2. 3 Array. He expects a meager 1% expansion in the U. S. next year.
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The fund forecasts China’s economy will grow just 3. 2% this year, down from 8. 1% last year. up to 4. 4% next year, which is still timid by Chinese standards.
According to the IMF, the collective economy of the 19 European countries that share the euro, reeling from crushing energy costs caused by Russia’s attack on Ukraine and Western sanctions against Moscow, will grow by 0. 5% in 2023.
The global economy has been in a frantic race since COVID-19 hit in early 2020. First, the pandemic and the lockdowns it generated paralyzed the global economy in the spring of 2020. Second, gigantic injections of government spending and ultra-low lending rates designed through the Federal Reserve and other central banks fueled a bizarre and immediate recovery from the pandemic recession.
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But recovery came here at a high cost. Factories, ports and cargo yards have been hit by strong demand for manufactured goods from customers, especially in the United States, leading to delays, shortages and higher costs. in 2021. )
In response, the Fed and other central banks reversed course and began raising rates sharply, risking a sharp slowdown and possibly a recession. The Fed has raised its key short-term interest rate five times this year. other countries and boosted the price of the dollar against other currencies.
Outside the United States, the emerging dollar makes imports sold in the U. S. currency, adding oil, more expensive and thus increases global inflationary pressures. Protect your coins.
Maurice Obstfeld, a former IMF chief economist who now teaches at the University of California, Berkeley, warned that an overly competitive Fed could simply “drag the world economy into an unnecessarily severe contraction. “