WASHINGTON, July 14 — The International Monetary Fund (IMF) plans to further downgrade its global growth projection later in July, Sputnik reported, quoting IMF Managing Director Kristalina Georgieva on Wednesday.
“Recent indicators imply a weak second quarter — and we will be projecting a further downgrade to global growth for both 2022 and 2023 in our World Economic Outlook Update later this month,” Georgieva said in a blog post.
The IMF Managing Director said while inflation remains higher than expected, major central banks have to announce further monetary tightening to address the rise in prices.
Such a move is necessary but it will weigh on the process of economic recovery, Georgieva added.
She added that the global economic situation will continue to be difficult in 2022 and 2023 with a growing risk of a recession.
“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession.”
The entire outlook is “extremely uncertain,” and further disruption to the natural gas supply to Europe could plunge many economies into a recession and trigger a global energy crisis, she added.
“This is just one of the factors that could worsen an already difficult situation,” Georgieva added.
Meanwhile, the IMF has warned that the US economy faces additional difficulties as the authorities try to calibrate the response to runaway inflation and avoid a recession.
“The directors recognised that calibrating the response to inflation comes with high stakes and that misjudging the policy mix – in either direction – will result in sizeable costs at home and negative spillovers to the global economy,” it said in a statement.
“They concurred that avoiding a recession in the United States is becoming increasingly challenging and that the Russian invasion of Ukraine, the lingering Covid-19 pandemic and supply side constraints create additional challenges.”
The IMF issued the statement upon the conclusion of the so-called Article IV consultations with the US.
The IMF praised the resilience of the US financial system and the Federal Reserve’s efforts to maintain the smooth functioning of the financial markets, the statement read.
“In this context, the directors encouraged the authorities to implement the remaining FSAP (Financial Sector Assessment Programme) recommendations to further strengthen the financial system,” the statement said.
The IMF recommended that the US government roll back the trade restrictions and tariff increases it had introduced over the past five years as well as work actively with trading partners to strengthen the rules-based multilateral trading system centred around the World Trade Organisation (WTO), the statement added.
It also warned that despite a quick recovery from the coronavirus pandemic and the relatively positive effects of the policy stimulus, the US economy continues to face significant inflationary challenges caused by rising energy prices and ongoing global supply disruptions.
— Bernama
