The IMF shows an adverse global scenario and does not rule out recession

First modification: 07/27/2022 – 03:17

A gray scene. The International Monetary Fund (IMF) published the revision of its economic forecasts and now forecasts that the world economy will grow only 3.2% this year and 2.9% in 2023, four and seven tenths below its April estimate .

The three largest economies, the United States, China and the Eurozone, are “slowing down” and this is already having “significant consequences” for the world economy, according to Pierre-Olivier Gourinchas, director of the IMF Research Department.

The Fund recalled that the risks of its April report have materialized and are affecting the world economy, hit by rising prices, the sharp slowdown in the Chinese economy and the negative effects of the war in Ukraine.

adverse scenario

But the IMF’s worst projection is if there is a sudden cut in the supply of Russian gas to Europe and if there is a tightening of financial conditions to further strangle developing economies. This without mentioning another additional risk, such as that of geopolitics preventing the normal development of world trade.

For this scenario, the IMF calculates an even lower global growth of 2.6% this year and only 2% in 2023; a figure only seen five times since 1970, and always during the main crises: 1973, 1981, 1982, 2008 and 2020.

The official added that those risks are there albeit “overwhelmingly downward.”

For the United States, the world’s largest economy, it suffered a significant revision in forecasts: 2.3% growth for this year and only 1% next year; 1.4 and 1.3 points less than in their April estimates.

For its part, China will grow 3.3% this year, 1.1 points less than the forecasts for April; and 4.6% the next. It is the lowest growth for the Asian giant in more than four decades, excluding the one it registered at the beginning of the coronavirus pandemic.

For the Eurozone, 2.6% is expected this year and 1.2% next year, two tenths and 1.1 points less than in April. But the Fund clarifies that the great economies of the old continent are suffering more than expected due to the collateral effects of the Russian invasion of Ukraine.

Latin America better resists 2022 but will stop in 2023

The economy of Latin America and the Caribbean showed better resistance to global shocks such as the war in Ukraine, although it will not escape the global economic slowdown and will feel its effects more in 2023.

The IMF now estimates that the region will grow 3% this year, half a point more than estimated in April. For 2023, it also worsens its forecast by half a point, and leaves it at 2%.

The deputy director of the Fund’s Research Department, Petya Koeva, stressed that there are many “nuances” to take into account according to each Latin American country, but as a whole the region “will not escape” this brake in 2023.

with EFE