IMF Head Warns of “Darkening” Outlook for Global Economy

The managing director of the IMF, Kristalina Georgieva, has said the organization is lowering its 2023 growth forecast, the fourth negative adjustment this year, when it releases its World Economic Outlook next week.

The IMF next week will downgrade its forecast for global growth in 2023 to 2.9%, citing rising risks of recession and financial instability.

Georgieva said the outlook for the global economy was “darkening,” given the tremors caused by the COVID-19 pandemic, Russia’s invasion of Ukraine, as well as climate emergencies on all continents, adding that things could worsen.

The IMF chief added that the world is experiencing a fundamental change from a period of relative predictability to a world with more fragility, greater uncertainty, and higher economic volatility.

Pointing out that all the world’s largest economies, including China, the US and the EU, were now slowing, she said this was reducing demand for exports from developing nations, which were badly affected by higher energy and food prices.

Georgieva said global inflation remained stubbornly high, but central banks should continue to respond decisively, even if the economy slowed. Fiscal measures adopted in response to high inflation should be targeted and temporary and should not cross purposes.

Overall, the IMF expects global output to shrink by $4 trillion between now and 2026, roughly the size of the German economy. This is a major setback that should sober the minds of traders and investors everywhere.