IMF chief Georgieva says she ‘can’t rule out’ a possible global recession
International Monetary Fund (IMF) Managing Director Kristalina Georgieva during a Bloomberg Television interview on the opening day of the World Economic Forum (WEF) in Davos, Switzerland, Monday, May 23, 2022.
Jason Alden | Bloomberg | Getty Images
The head of the International Monetary Fund said on Wednesday that the outlook for the global economy had darkened “significantly” since April and that she could not rule out a possible global recession next year given the elevated risks.
IMF Managing Director Kristalina Georgieva told Reuters the fund would in coming weeks lower its 2022 forecast for global economic growth of 3.6% for the third time this year, adding that IMF economists were finalizing new numbers again.
The IMF is due to release its updated forecasts for 2022 and 2023 at the end of July, after cutting its forecast by almost a percentage point in April. The global economy grew by 6.1% in 2021.
“The outlook since our last update in April has darkened significantly,” she told Reuters in an interview, citing a more universal spread of inflation, bigger interest rate hikes, a slowing economic growth in China and an escalation of sanctions related to Russia’s war in Ukraine.
“We are in very choppy waters,” she said. When asked if she could rule out a global recession, she replied: “The risk has increased, so we can’t rule it out.”
Recent economic data showed that some major economies, including those of China and Russia, contracted in the second quarter, she said, noting that the risks were even higher in 2023.
“It’s going to be a tough 22, but maybe even a tougher 2023,” she said. “The risks of recession have increased in 2023.”
Investors are increasingly concerned about recession risks, with a key part of the US Treasury yield curve inverted for a second straight day on Wednesday, in what has been a reliable indicator that a recession is looming.
Federal Reserve Chairman Jerome Powell said last month that the US central bank was not trying to provoke a recession, but was fully committed to bringing prices under control, even if it risked causing an economic slowdown.
Georgieva said a more lasting tightening of financial conditions would complicate the global economic outlook, but added that getting the surge in prices under control was crucial.
The global outlook is more mixed today than just two years ago, with energy exporters, including the United States, in a better position, while importers struggled, she said. declared.
A slowdown in economic growth could be a “necessary price to pay” given the urgent and pressing need to restore price stability, she said.