WASHINGTON — The president of the International Monetary Fund warned on Thursday that the risk of a recession is rising around the world as inflation, rising borrowing costs and persistent supply chain disruptions continue to hurt the global economy.
IMF leader Kristalina Georgieva said international organizations will lower their growth forecasts for next year in their next report as these problems persist. The assessment is the latest example of how last year’s optimism about a strong global economic recovery has given way to concerns over rapid inflation, Russia’s war in Ukraine and the ongoing pandemic.
“Several shocks, including senseless wars, have completely changed the economic landscape,” IMF Managing Director Georgieva said in preparation for a speech at Georgetown University. “Rather than being temporary, inflation has become more persistent.”
The IMF has steadily lowered its forecasts in recent months and now expects global output to rise by 2.9% next year. That forecast will be lowered next Tuesday when the IMF and World Bank annual meetings begin in Washington, D.C., when the IMF releases its closely watched World Economic Outlook report.
Policymakers at the conference will seek to better coordinate their responses to inflationary pressures and recession risks while preparing for the impact of higher interest rates.
“For major economies facing high inflation, the immediate challenge is to return to a stable price environment,” Treasury Secretary Janet L. Yellen said in a speech at the Global Development Center on Thursday. “However, it is important to recognize that macroeconomic tightening in advanced economies could have international knock-on effects.”
Yellen added that the IMF and multilateral development banks must be ready to help developing countries if a debt crisis hits, adding that many emerging markets will need “substantial debt relief”. suggested.
The IMF now expects countries, which account for about a third of the global economy, to contract for at least two consecutive quarters in 2022 or 2023.
“Even if growth is positive, it will feel like a recession because of shrinking real incomes and rising prices,” Georgieva said.
In her speech, Georgieva painted a grim portrait of the world’s economic woes. She said Europe is feeling the pain of declining Russian gas supplies, China’s property market is facing a deep recession, and the U.S. economy is struggling with rising inflation and interest rates unsettling consumers and discouraging investment. He pointed out that it was losing momentum because it was stalling.
Emerging market and developing economies are even more disadvantaged in meeting rising food and energy prices, especially as export demand declines.
Last year, hopes of a booming economy were subverted by vaccines and supply chain improvements, but fears of new economic shocks and financial stability risks were subverted.
“Overall, we expect global production losses to be around $4 trillion between now and 2026. This is the size of the German economy, which is a huge setback for the global economy,” said Georgieva. increase.
She added: