IMF slashes global growth outlook

The International Monetary Fund cut global growth forecasts again on Tuesday, warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked. Global real GDP growth will slow to 3.2 per cent in 2022 from a forecast of 3.6 per cent issued in April, the IMF said in an update of its World Economic Outlook. It added that world GDP actually contracted in the second quarter due to downturns in China and Russia. Global growth has fallen below 2 per cent only five times since 1970, the IMF said, including the 2020 COVID-19 recession.

The Fund cut its 2023 growth forecast to 2.9 per cent from the April estimate of 3.6 per cent, citing the impact of tighter monetary policy. World growth had rebounded in 2021 to 6.1 per cent after the COVID-19 pandemic crushed global output in 2020 with a 3.1 per cent contraction."The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one," IMF Chief Economist Pierre-Olivier Gourinchas said in a statement. The Fund said its latest forecasts were "extraordinarily uncertain" and subject to downside risks from Russia's war in Ukraine spiking energy and food prices higher. This would exacerbate inflation and embed longer-term inflationary expectations that would prompt further monetary policy tightening.