The International Monetary Fund (IMF) is trimming its global growth projections for this year and next as inflation continues unchecked and the war in Ukraine shows no signs of ending, the Financial Times reported.
“Recent indicators imply a weak second quarter and we will be projecting a further downgrade to global growth for 2022 and 2023 in our World Outlook Economic Update later this month,” IMF managing director Kristalina Georgieva announced in a blog post last week.
In April, the fund cut its 4.4-percent January estimate to 3.6 percent while warning of potential downside risks.
Those risks have materialized, creating a “cost-of-living crisis” that is “only getting worse,” she said.
The estimate is the lowest since the COVID War began in March 2020.
Among the risks is the prospect that Russia could end its shipments of natural gas to Germany, which would spark “a global energy crisis” and “plunge many economies into recession,” she warned.
“Acting now” to curb inflation “will hurt less than acting later,” Georgieva added, but acknowledged that higher rate increases by central banks are likely to cost jobs and growth.
Sovereign bond yields denominated in foreign currencies are now above 10 percent in a third of emerging economies, “close to the highs last seen after the global financial crisis,” she noted, and urged industrialized nations to stand ready to help and emerging nations to reduce borrowing.
Food price inflation threatens to cast an additional 71 million people worldwide into extreme poverty, defined as an income of less than $1.90 per day, the IMF calculated.
Rising poverty rates raise the likelihood of “hunger, malnutrition, and migration,” with resulting social instability already increasing, the agency said.
TREND FORECAST: The odds are increasing that inflation will remain untamed until recession hits very hard and interest rates rise much higher.
Inflation will continue at least into the early phases of recession, leading to a period of Dragflation, our Top 2022 Trend of rising prices and shrinking GDPs.