IMF Warns of Higher Recession Risk and Darker Global Outlook

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WASHINGTON—Two main economists painted precise antithetic pictures Thursday of what the global economy volition look similar successful the coming years.

Kristalina Georgieva, managing manager of the International Monetary Fund, told an assemblage astatine Georgetown University connected Thursday that the IMF is erstwhile again lowering its projections for planetary economical maturation successful 2023, projecting satellite economical maturation little by $4 trillion done 2026.

“Things are much apt to get worse earlier it gets better,” she said, adding that Ukraine’s struggle that began successful February has dramatically changed the IMF’s outlook connected the economy. “The risks of recession are rising,” she said, calling the existent economical situation a “period of historical fragility.”

Meanwhile, U.S. Treasury Secretary Janet Yellen, connected the different broadside of municipality astatine the Center for Global Development, focused connected however the U.S. and its allies could lend to making longer-term investments to the planetary economy.

She called for ambitious argumentation solutions and didn’t usage the connection “recession” once. But contempt Yellen’s much measured view, she said “the planetary system faces important uncertainty.”

The warfare successful Ukraine has driven up nutrient and vigor prices globally.

Additionally, the ongoing COVID-19 pandemic and rising ostentation are besides impacting satellite economies and exacerbating different crises, similar precocious indebtedness levels held by lower-income countries.

Georgieva said the IMF estimates that countries making up one-third of the satellite system volition spot astatine slightest 2 consecutive quarters of economical contraction this oregon adjacent twelvemonth and added that the instauration downgraded its planetary maturation projections already 3 times. It present expects 3.2 percent for 2022 and present 2.9 percent for 2023.

The bleak IMF projections travel arsenic cardinal banks astir the satellite rise involvement rates successful hopes of taming rising inflation. The U.S. Federal Reserve has been the astir assertive successful utilizing involvement complaint hikes arsenic an inflation-cooling tool, and cardinal banks from Asia to England person begun to rise rates this week.

Georgieva said “tightening monetary argumentation excessively overmuch and excessively fast—and doing truthful successful a synchronized mode crossed countries—could propulsion galore economies into prolonged recession.” Maurice Obstfeld, an economist astatine the University of California, Berkeley, precocious wrote that excessively overmuch tightening by the Federal Reserve could “drive the satellite system into an unnecessarily harsh contraction.”

Yellen agreed Thursday that “macroeconomic tightening successful precocious countries tin person planetary spillovers.”

The 2 economists’ speeches travel up of yearly meetings adjacent week of the 190-nation IMF and its sister-lending agency, the World Bank, which mean to code the multitude of risks to the planetary economy.

Georgieva said the updated World Economic Outlook of the money acceptable to beryllium released adjacent week downgrades maturation figures for adjacent year.

The Organization for Economic Cooperation and Development past week said the planetary system is acceptable to suffer $2.8 trillion successful output successful 2023 due to the fact that of Ukraine’s war.

The projections travel aft the OPEC+ confederation of oil-exporting countries decided Wednesday to sharply chopped accumulation to enactment sagging lipid prices successful a determination that could woody the struggling planetary system different stroke and rise politically delicate pump prices for U.S. drivers.

Yellen said since galore processing countries are facing each challenges simultaneously, from indebtedness to hunger to exploding costs, “this is nary clip for america to retreat.”

“We request ambition successful updating our imaginativeness for improvement financing and delivery. And we request ambition successful gathering our planetary challenges,” she said.

By Fatima Hussein

The Associated Press