IMF slashes growth projection; predicts global ‘recession’

• IMF revised its projection for the global economy in a study released on Tuesday.
• More threats are emerging, including the potential for Russia to stop the supply of gas to Europe.
• The top three economies in the world are all experiencing stagnant growth, the IMF stated.

Risks are increasing despite the fact that the global economy is already in turmoil.

The International Monetary Fund (IMF) revised its projection for the global economy in a study released on Tuesday as it anticipated significant slowdowns in the world’s three largest economies—the United States, China, and Europe.

The report noted that these downturns, along with the ongoing conflict in Ukraine, faster-than-expected inflation, and tighter monetary policy around the world, have continued to batter the already weak global economy.

From 6.1 percent in 2021, the IMF now predicts that the global economy will expand by just 3.2 percent this year.

Only 2.9 percent growth is projected for next year, which is only marginally better than the 2.5 percent growth level that the IMF has historically regarded as the threshold for a global recession.

However, that forecast is predicated on the status quo. More threats are emerging, including the potential for Russia to stop the supply of gas to Europe. According to the IMF, that would increase inflation even further and reduce this year’s global growth to approximately 2.6 percent, which is just shy of the hot zone.

According to the IMF, such a scenario may lead to an official recession the following year, which would further slow global growth to just 2%. Only five times since 1970 have we seen growth that weak, according to the IMF.

In April, the IMF revised its outlook for the world, comparing the effects of Russia’s invasion of Ukraine to an “earthquake.” At that time, it had estimated growth of roughly 3.6 percent for the years 2022 and 2023.

The IMF’s director of research, Pierre-Olivier Gourinchas, stated in a blog post on Tuesday that “the prognosis has deteriorated markedly.” “Only two years after the last one, the globe may soon be on the verge of another one. “The top three economies in the world are all experiencing stagnant growth.

The spike in prices has left American consumers with less purchasing power, which has resulted in lower-than-expected consumer expenditure, the IMF stated.

The group noted that Covid-19 lockdowns in China have continued to hurt the economy and caused a slowdown that “has been harsher than anticipated.” IMF projections for China’s GDP growth this year have been reduced from 4.4 percent to 3.3 percent.

That would be “the slowest [pace] in more than four decades, discounting the epidemic,” according to Gourinchas. The government’s official aim is around 5.5 percent.

With the rise in energy costs, “weaker consumer confidence, and slower momentum in manufacturing due to prolonged supply chain disruptions,” the IMF noted, the impact of Russia’s invasion of Ukraine in Europe has been more than expected.

Already, businesses are preparing for the worst. GM (GM) announced on Tuesday that it was cutting back on spending and hiring in order to prepare for a downturn in the economy.

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