NATIONAL NEWS

‘The worst is yet to come’: IMF issues stark recession warning

Oct 11, 2022, 1:10 PM | Updated: 3:24 pm
A customer pushes a shopping cart and bags outside a supermarket operated by Aldi Einkauf GmbH & Co...
A customer pushes a shopping cart and bags outside a supermarket operated by Aldi Einkauf GmbH & Co., also known as Aldi Nord, in central Berlin, Germany, on Tuesday, Oct. 4. (Krisztian Bocsi/Bloomberg/Getty Images via CNN)
(Krisztian Bocsi/Bloomberg/Getty Images via CNN)

(CNN) — The International Monetary Fund has once again downgraded its forecast for the global economy with a sharp warning: “The worst is yet to come, and for many people 2023 will feel like a recession.”

The agency said Tuesday that it expects global growth to slump to 2.7% next year, with a 25% probability it could fall below 2%. That compares with projected growth of 3.2% this year.

The figure for next year is 0.2 percentage points lower than the IMF’s July outlook, as Russia’s war in Ukraine, high inflation and a slowdown in China drag on activity.

“More than a third of the global economy will contract this year or next, while the three largest economies — the United States, the European Union, and China — will continue to stall,” said Pierre-Olivier Gourinchas, the IMF’s chief economist.

The prospects for the global economy as outlined by the IMF are the third weakest since 2001, behind only the 2008 financial crisis and the worst phase of the coronavirus pandemic. Global growth has fallen below 2% just five times since 1970.

The IMF believes that global inflation will peak late this year, but will “remain elevated for longer than previously expected,” even as central banks work aggressively to bring it under control.

Global inflation is expected to rise from 4.7% in 2021 to 8.8% this year. It’s then forecast to fall back to 6.5% in 2023 and 4.1% by 2024.

Major central banks aim for inflation near 2%, and have been hiking interest rates in a bid to limit price rises. But the campaign is also boosting risks to the economy.

If they go too hard, it could exacerbate a global downturn, while dialing back efforts could allow inflation — which the IMF called “the most immediate threat to current and future prosperity” — to become entrenched.

“Central banks around the world are now laser-focused on restoring price stability, and the pace of tightening has accelerated sharply,” Gourinchas wrote. “There are risks of both under- and over-tightening.”

‘Batten down the hatches’

Last week, the United Nations Conference on Trade Development cautioned that tighter monetary policy could inflict worse damage globally than the financial crisis in 2008 and the Covid-19 shock in 2020.

The IMF said that higher rates, while necessary, are creating instability, particularly for emerging markets with high levels of debt.

“As the global economy is headed for stormy waters, financial turmoil may well erupt, prompting investors to seek the protection of safe-haven investments, such as US Treasuries, and pushing the dollar even higher,” it said. “Now is the time for emerging market policymakers to batten down the hatches.”

The latest forecasts included some notable downgrades for big economies. The United States is now expected to grow by just 1.6% this year, and is set to expand by only 1% in 2023.

Growth in China has also been revised lower, to 3.2% in 2022 and 4.4% in 2023. The IMF called out the lingering effects of attempts to contain the spread of coronavirus and the rapid weakening of the property sector, which it said accounts for about one-fifth of the country’s economic activity.

“Given the size of China’s economy and its importance for global supply chains, this will weigh heavily on global trade and activity,” the IMF said.


The-CNN-Wire™ & © 2022 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

KSL 5 TV Live

Top Stories

National News

Former U.S. President Donald Trump speaks during an election night event at Mar-a-Lago on November ...
Meg Kinnard and Michelle L. Price

Trump says beating of Nichols ‘never should have happened’

Former President Donald Trump says the footage of the brutal beating of Tyre Nichols by five Memphis police officers is “horrible” and that the attack “never should have happened.”
1 day ago
One the of climbers in the training camp climbing a wall. (KSL-TV's Alex Cabrero)...
Alex Cabrero

USA Climbing Camp for Paris 2024 begins in Salt Lake City

As the Summer 2024 Olympic Games draws closer, those athletes looking to participate begin their training. 
1 day ago
MEMPHIS, TENNESSEE - SEPTEMBER 7:  Police investigate the scene of a reported carjacking reportedly...
Adrian Sainz

Memphis police disband unit that fatally beat Tyre Nichols

The Memphis Police Department has disbanded the special unit whose officers beat to death motorist Tyre Nichols
1 day ago
Demonstrators participate in a protest against the police killing of Tyre Nichols on January 27, 20...
Adrian Sainz, Associated Press

Memphis authorities release video in Tyre Nichols’ death

Video showing five Memphis officers beating Tyre Nichols, a Black man, has been made public.
2 days ago
An apparent shortage of pharmacists is forcing CVS and Walmart to reduce the hours of its pharmacie...
Jordan Valinsky

CVS and Walmart cut pharmacy hours, close some locations earlier, citing staffing shortage

An apparent shortage of pharmacists is forcing CVS and Walmart to reduce the hours of its pharmacies, as they close earlier in thousands of locations.
2 days ago
Video of the attack on Paul Pelosi at his San Francisco home was released after a California court ...
Jeremy Herb, Jack Hannah and Jack Forrest

Court releases video of attack on Paul Pelosi

The San Francisco Superior Court on Friday released video and audio recorded during last year's attack on Nancy Pelosi's husband, Paul Pelosi, including police body-cam footage depicting the moment of the attack and the alleged assailant's police interview where he admitted he wanted to hold the then-House speaker hostage.
2 days ago

Sponsored Articles

Fiber Optical cables connected to an optic ports and Network cables connected to ethernet ports...
Brian Huston, CE and Anthony Perkins, BICSI

Why Every Business Needs a Structured Cabling System

A structured cabling system benefits businesses by giving you faster processing speeds and making your network more efficient and reliable.
notebook with password notes highlighted...
PC Laptops

How to Create Strong Passwords You Can Actually Remember

Learn how you can create strong passwords that are actually easy to remember! In a short time you can create new ones in seconds.
house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 Reasons You May Want to Consider Apartment Life Over Owning a Home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to Choose What MBA Program is Right for You: Take this Quiz Before You Apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t Let a Ransomware Attack Get You Down | Protect Your Workplace Today with Cyber Insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
‘The worst is yet to come’: IMF issues stark recession warning