The International Monetary Fund (IMF) issues a global recession warning – is it a warning or a threat?

On Tuesday 11thOctober the IMF or International Monetary Fund “issued a warningover a possible global recession as “the slowdown of the global economy has intensified.””[1]It has forecasted global growth of 2.7% next year 0.2 percentage point lower than its July forecast and predicts that 2023 will feel like a recession for millions of people around the world. Its GDP forecast for this year remained stable at 3.2% down from 6% in 2021.[2]

What is the IMF? We are given the description that it “is an organization of 189 member countries that works to foster global monetary cooperation secure financial stability facilitate international trade promote high employment and sustainable economic growth and reduce poverty around the world.”

The organization also released its most recent reports on the global economy and financial stability. The IMF stated that economic pressures have risen in recent months citing rising inflation COVID shutdowns in China and the lingering effects of Russia’s invasion of Ukraine as the main reasons.

The article blames the worldwide central banks for having raised interest rates in response to record inflation plus supplying chain issues the ongoing impact of Covid and Russia’s invasion of Ukraine which have exacerbated already difficult economic conditions.

While Europe has been dealing with a natural gas and energy crisis China has seen a resurgence of COVID shutdowns and ripples in the housing market. Meanwhile after a 99-day decline oil prices in the United States have risen again in recent weeks.

According to the report more than a third of the global economy will experience two consecutive quarters of negative growth while the three largest economies — the United States the European Union and China — will continue to slow.

China’s “zero-Covid policy ” and the resulting lockdowns continue to harm the country’s economy. Property accounts for roughly one-fifth of China’s economy and as the market struggles the ramifications are felt globally.

It predicted that global inflation will likely fall to 6.5% in 2023 and 4.1% in 2024 noting the global tightening of monetary policy to combat inflation as well as the “powerful appreciation” of the US dollar in comparison to other currencies.

The report added that the shocks of 2022 will “re-open economic wounds that were only partially healed following the pandemic” and mentioned a “deteriorated” economic outlook. The report stated “The global environment is fragile with storm clouds on the horizon.”

Pierre-Olivier Gourinchas the IMF’s chief economist stated that “Next year is going to feel painful. “There’s going to be a lot of slowdown and economic pain.”

In a press conference Tobias Adrian director of monetary and capital departments at the IMF stated:
“Global financial stability risks have increased with a balance of risk that is skewed to the downside. Markets have been extremely volatile” adding that global market conditions in emerging economies have deteriorated significantly: 20 countries are either in default or trading at stress levels.”
He also said that according to the IMF’s global stress tests for banks 29% of emerging market banks may fail to meet minimum capital requirements.
According to the IMF this is “the weakest growth profile since 2001” and the overall economic picture is bleak with global growth projected to fall from 6.1 percent in 2021 to 3.6 percent in 2022 and 2023.

In its report the IMF said:

“In short the worst is yet to come and for many people 2023 will feel like a recession.”
This echo similar warnings issued by the United Nations[3] the World Bank[4] and many global CEOs[5].
Is this a warning or a threat?


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