World “on the brink of a global recession,” says the IMF

On Tuesday, July 26, the International Monetary Fund lowered its global growth forecast for 2022 to 3.2% while describing the economic outlook as “increasingly bleak and uncertain”.

Forecasts for the world economy follow one another and end up looking the same. With each new update, the outlook worsens. This time they are being judged by the International Monetary Fund (IMF). “ever darker and more uncertain” and which revised the various indicators downwards. The international institution only expects global GDP growth of 3.2% this year. This is almost twice as much as in 2021 (6.1%). And 0.4 points lower than expected three months earlier. As for inflation, it is expected to be 6.6% for the year in advanced economies and 9.5% in emerging and developing markets.

And again, it’s not a worst-case scenario. Pierre-Olivier Gourinchas, the IMF’s chief economist, spoke “a significant slowdown”, without even betting on a “Global Recession Scenario”, but don’t hide your concerns “cumulative downside risks”. Among them the war in Ukraine and its possible new consequences such as a disruption in Russian gas imports to Europe, inflation that would become entrenched, a fight against rising prices that would prove very costly, over-indebtedness in emerging economies, a new outbreak of Covid in China… If these threats materialised, then “The world may soon find itself on the brink of a global recession, just two years after the previous one.”

The United States blames the blow

France would not escape this slump. Its GDP growth this year would be 2.3% – a forecast in line with several other forecasts but below that of the government (2.5%) and it would fall back to just 1% next year. Again, this is lower than the 1.4% forecast for 2023 that Bercy included in the stability program that the French executive intends to submit to the European Commission.

Although Europe is bearing the brunt of the fallout from Russia’s invasion of Ukraine and monetary tightening, it’s not the only country to see the horizon darken. With growth estimated at 2.3% this year, 1.4 points lower than the last forecast in April, the United States is suffering the blow of a slowdown in growth, a fall in household electricity purchases and tightening monetary policy. In addition, the US Federal Reserve is preparing to raise interest rates this week for the fourth time since the beginning of the year. The country is even fast approaching a recession. The IMF estimates that the likelihood of the USA escaping it is low. Pierre-Olivier Gourinchas considers that a “Tiny shocks could plunge US economy into recession”. China’s GDP will only grow by 3.3% in 2022, 1.1 points less than the IMF’s most recent forecast. The explanation would be due to “Recontainments” and to “Aggravation of the real estate crisis” their effects were “World Majors”.

inflation everywhere

A notable exception to this general deterioration is Russia. While the IMF expected its GDP to fall by 8.5% this year because of Western sanctions, it only expects a 6% drop. In particular, this would be a consequence of “Crude oil and non-energy exports are holding up better than expected” and some resilience of domestic demand.

As a result, inflation takes hold around the world “Rising food and energy prices, supply constraints in many sectors and a shift in demand towards services”, emphasizes the IMF. And it’s also progressing because “Cost pressures from supply chains and labor shortages, particularly in advanced countries.” Nowhere are wages following prices, and purchasing power is crumbling everywhere. The IMF is also not very optimistic about the timing of the inflation peak: “Inflation is widely expected to approach pre-pandemic levels by the end of 2024. However, several factors could cause it to continue its momentum and raise longer-term expectations.” These factors are in turn linked to the Russian-led war in Ukraine, which could increase inflation and lead to further interest rate hikes by central banks. “These shocks, if severe enough, would result in a recession accompanied by high and rising inflation, a phenomenon known as stagflation.” fears the IMF, which, however, specifies this “but does not belong to the reference scenario”. I’m not sure if that’s so reassuring.

Kaddouri Ismail

I am Ismail from Morocco, I work as a blogger and online marketer. I am also the founder of the “Mofid” site, in which I constantly publish many important articles in the field of technology, taking advantage of more than 5 years of experience working in the field. I focus on publishing in a group of areas, the most important of which are programming, e-marketing, digital currencies and freelance work.

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