The International Monetary Fund (IMF) cut its global growth outlook for this year and next, warning that the world economy may soon be on the cusp of an outright recession.
Global economic expansion will likely slow to 3.2 per cent this year, less than the 3.6 per cent forecast by the fund in April and the 4.4 per cent seen in January, the IMF said in an update to its World Economic Outlook released on July 26.
The series of interest-rate increases that central banks have unleashed to contain inflation “is expected to bite” in 2023, with global output growth set to slow to 2.9%, it said.
While the crisis lender is still forecasting positive growth, that will do little to quell rising concern of receding expansion or even outright recession in major economies as accelerating price increases eat away at incomes, savings and profits.
“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,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said in a blog accompanying the release of the update.
Consumer prices have consistently climbed more quickly than expected, with the fund seeing inflation accelerating even further this year as higher food and energy costs couple with lingering supply-and-demand imbalances. It now projects the global consumer-price gauge to increase 8.3 per cent this year, which would be the biggest jump since 1996. The April estimate was 7.4 per cent.