IMF warns worst is yet to come for world economy

The International Monetary Fund (IMF) has warned "the worst is yet to come" for the world economy as war in Ukraine continues and prices spiral.

The global financial institution's World Economic Outlook report said that “for many people 2023 will feel like a recession"

The International Monetary Fund's analyses of global economic developments said that more than a third of the global economy will contract in 2023, as the three largest economies— America, the EU, and China—will continue to stall.

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The IMF downgraded its outlook for the world economy for 2023, citing a long list of threats that include Russia’s war against Ukraine, chronic inflation pressures, punishing interest rates and the lingering consequences of the global pandemic.

The International Monetary Fund (IMF) has warned "the worst is yet to come" for the world economy as war in Ukraine continues and prices spiral.The International Monetary Fund (IMF) has warned "the worst is yet to come" for the world economy as war in Ukraine continues and prices spiral.
The International Monetary Fund (IMF) has warned "the worst is yet to come" for the world economy as war in Ukraine continues and prices spiral.

The 190-country lending agency forecast that the global economy would eke out growth of just 2.7% next year, down from the 2.9% it had estimated in July.

The IMF left unchanged its forecast for international growth this year – a modest 3.2%, a sharp deceleration from last year’s 6% expansion.

It said the UK was on course for a sizeable slowdown in growth from 3.6% this year to 0.3% in 2023 but said its forecasts had been made before the mini-budget on 23 September.

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“The fiscal package is expected to lift growth somewhat above the forecast in the near term, while complicating the fight against inflation,”

IMF managing director Kristalina Georgieva, noting the grim backdrop to this week’s autumn meetings of the IMF and the World Bank in Washington, warned that the “risks of recession are rising” around the world and that the global economy is facing a “period of historic fragility”.

In its latest estimates, the IMF slashed its outlook for growth in the United States to 1.6% this year, down from a July forecast of 2.3%.

It expects meagre 1% US growth next year.

The fund foresees China’s economy growing just 3.2% this year, down drastically from 8.1% last year.

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Beijing has instituted a draconian zero-Covid policy and has cracked down on excessive real estate lending.

China’s growth is forecast to accelerate to 4.4% next year.

In the IMF’s view, the collective economy of the 19 European countries that share the euro currency, reeling from crushingly high energy prices caused by Russia’s attack on Ukraine and western sanctions against Moscow, will grow just 0.5% in 2023.

The world economy has endured a wild ride since Covid-19 hit in early 2020.

The IMF expects worldwide consumer prices to rise 8.8% this year, up from 4.7% in 2021.

In response, the Fed and other central banks have reversed course and begun raising rates dramatically, risking a sharp slowdown and potentially a recession.

Higher rates in the United States have lured investment away from other countries and strengthened the value of the dollar against other currencies.

Outside the United States, the higher dollar makes imports that are sold in the American currency, including oil, more expensive and therefore heightens global inflationary pressures.

It also forces foreign countries to raise their own rates – and burden their economies with higher borrowing costs – to defend their currencies.

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Maurice Obstfeld, a former IMF chief economist who now teaches at the University of California, Berkeley, has warned that an overly aggressive Fed could “drive the world economy into an unnecessarily harsh contraction”.

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