WASHINGTON: The IMF expects to once again cut its forecast for world growth this year amid a continued deterioration of conditions in the global economy, a fund official said on Thursday.
“So much has happened and (is) happening very quickly,” IMF spokesperson Gerry Rice told reporters, including the ongoing war in Ukraine, accelerating inflation and a steeper-than-expected slowdown in China.
The fund in April cut the 2022 GDP estimate to 3.6 per cent from 4.4 per cent, but now “we’re seeing this confluence of crises… that could lead us to revise down further,” he said.
“We see the global economy headed into a growth slowdown,” Rice said, adding that “a number of countries may be looking at recession.”
The World Bank on Tuesday slashed its projection by more than a point to 2.9 per cent, and warned that the United States faces a worrisome return of 1970s-style “stagflation” with tepid growth, high joblessness and surging prices.
But Rice downplayed that risk, noting that while the United States is “facing some severe headwinds” including inflation, “growth in the US economy continues to be strong.”
The Organisation for Economic Cooperation and Development likewise lowered its outlook due to the fallout from the Russian war of Ukraine, cutting the GDP growth estimate to just 3.0 per cent from 4.5 per cent in December, but minimised the stagflation risk.
The US Federal Reserve has been raising interest rates aggressively and is expected to approve another big hike next week as it tries to cool surging prices that jumped 8.3 per cent in April.
The central bank is walking a fine line as it tries to slow the economy without tipping it into recession, and IMF number two Gita Gopinath on Wednesday said the Fed faces an “incredibly narrow path” and may have to raise rates steeply to tamp down inflation pressures. (AFP)
