# IMF’s Georgieva sees ‘darkening’ outlook for global economy, rising recession risks Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-10-06 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: IMF Downgrades 2023 Global Growth Forecast Amid Recession Meta Description: IMF Managing Director warns of slower global growth due to COVID-19, war in Ukraine, and climate disasters. Uncertainty and financial instability loom. URL: https://financedigest.com/imfs-georgieva-sees-darkening-outlook-for-global-economy-rising-recession-riskshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-10-06t163027z2lynxmpei950p6rtroptp4health-coronavirus-china-1736815086930-compressed.jpg) By Andrea Shalal WASHINGTON (Reuters) -The International Monetary Fund will next week downgrade its forecast for 2.9% global growth in 2023, Managing Director Kristalina Georgieva said on Thursday, citing rising risks of recession and financial instability. Georgieva said the outlook for the global economy was “darkening” given the shocks caused by the COVID-19 pandemic, Russia’s invasion of Ukraine and climate disasters on all continents, and it could well get worse. We are experiencing a fundamental shift in the [global economy](https://www.financedigest.com/global-economy-seen-facing-a-challenging-year-eurochambres.html "Global economy seen facing a challenging year -Eurochambres"), from a world of relative predictability … to a world with more fragility – greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating [natural disasters,”](https://www.financedigest.com/global-natural-disaster-losses-reach-45bn-during-1h-2018-insurance-payouts-estimated-at-21bn-according-to-aon-catastrophe-report.html "Global natural disaster losses reach bn during 1H 2018; insurance payouts estimated at bn, according to Aon catastrophe report") she said in a speech at Georgetown University. Georgieva said the old order, characterized by adherence to global rules, low interest [rates and low inflation](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February"), was giving way to one in which “any country can be thrown off course more easily and more often. She said all of the [world’s largest economies](https://www.financedigest.com/at-chinas-largest-trade-fair-exporters-worry-about-world-economy.html "At China’s largest trade fair, exporters worry about world economy") – Europe, China and the United States – were now slowing down, which was dampening demand for exports from emerging and developing countries, already hit hard by high food and energy prices. The IMF would lower its 2023 growth forecast from 2.9%, its fourth downward revision this year, when it releases its World Economic [Outlook next](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") week, she said. The global lender would [leave its current](https://www.financedigest.com/more-than-half-of-workers-are-open-to-leaving-their-current-employers.html "MORE THAN HALF OF WORKERS ARE OPEN TO LEAVING THEIR CURRENT EMPLOYERS") forecast for 3.2% growth in 2022 unchanged, she said, and gave no number for the new 2023 forecast. The war in Ukraine and global economic [risks will dominate next week’s annual meetings of the IMF and the World Bank](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") in Washington, which bring together finance ministers and central bankers from around the world. The IMF estimates that countries [accounting for about one-third of the world economy](https://www.financedigest.com/the-sharing-economy-whats-in-it-for-accountants.html "THE SHARING ECONOMY: WHAT’S IN IT FOR ACCOUNTANTS?") will see at least two consecutive quarters of contraction this year or next, Georgieva said. And, even when growth is positive, it will feel like a recession because of shrinking real incomes and [rising prices,”](https://www.financedigest.com/oil-prices-rise-on-u-s-drawdown-chinese-fears-weigh.html "Oil prices rise on U.S. drawdown, Chinese fears weigh") she said. Overall, the IMF [expects global output](https://www.financedigest.com/uk-manufacturers-expect-output-to-fall-3-2-in-2023.html "UK manufacturers expect output to fall 3.2% in 2023") to shrink by $4 trillion between now and 2026. That is roughly the size of the [German economy](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") and amounts to a “massive setback,” she added. [GLOBAL DIVISIONS](https://www.financedigest.com/global-blockchain-services-firm-wachsman-recruits-key-executives-from-jefferies-and-j-p-morgan-to-lead-new-strategy-division.html "Global Blockchain Services Firm WACHSMAN Recruits Key Executives from Jefferies and J.P. Morgan to Lead New Strategy Division") Georgieva said the division of the [global economy](https://www.financedigest.com/global-economy-weathered-98bn-natural-hazard-loss-in-first-half-of-2016-according-to-aon-catastrophe-report.html "GLOBAL ECONOMY WEATHERED BN NATURAL HAZARD LOSS IN FIRST HALF OF 2016, ACCORDING TO AON CATASTROPHE REPORT") into blocs supporting Russia, opposing it, or “sitting on the bench” following its invasion of Ukraine would wind up reducing important efficiencies and hurting poor people the most. We cannot afford the [world to break](https://www.financedigest.com/breaking-the-stigma-men-and-mental-health-in-the-world-of-investments.html "Breaking the Stigma: Men and Mental Health in the World of Investments") apart,” she said. If we go to a point where we cut off parts of the world from each other, it will be the poor in rich [countries](https://www.financedigest.com/as-who-pandemic-pact-talks-begin-poor-countries-on-back-foot.html "As WHO pandemic pact talks begin, poor countries on back foot") and it will be the poor countries that will bear the brunt of the impact of it. [Uncertainty remained high and more economic](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector-2.html "Combatting economic uncertainty in 2023 with the payments sector") shocks were possible, she said, warning that high debt levels and liquidity concerns could amplify the rapid and disorderly repricing of assets on financial markets. Georgieva said inflation remained stubbornly high, but central banks should continue to respond decisively, even if the [economy slowed](https://www.financedigest.com/visa-revenue-growth-slows-more-as-tough-economy-sobers-spending.html "Visa revenue growth slows more as tough economy sobers spending") down. She told CNBC in an interview that U.S. Federal Reserve Chair Jerome Powell was walking a “very, very narrow” path in shaping monetary policy, but the IMF [expected interest rates](https://www.financedigest.com/ecbs-makhlouf-expects-50-bps-rate-hike-in-december.html "ECB’s Makhlouf expects 50 bps rate hike in December") to be “somewhere in the 4% territory” in 2022 and 2023. “If he doesn’t tighten enough, inflation may de-anchor. If he tightens too much, there could be recession. So Jay Powell is doing his best to watch the parameters in the economy to calibrate what he does, and I trust that he will make the right call,” she said. Fiscal measures adopted in response to high [energy prices should be targeted](https://www.financedigest.com/britains-tax-take-risks-blowing-green-energy-off-target.html "Britain’s tax take risks blowing green energy off target") and temporary, she said in the speech. In other words, while [monetary policy](https://www.financedigest.com/uks-ftse-100-dips-on-scope-of-tighter-monetary-policy-informa-jumps.html "UK’s FTSE 100 dips on scope of tighter monetary policy; Informa jumps") is hitting the brakes, you shouldn’t have a fiscal policy that is stepping on the accelerator. This would make for a very rough and dangerous ride.” Britain this week reversed plans to cut taxes for the richest that had sparked market turmoil and a sharp rebuke from the IMF, which [warned that the country’s financial plans risked](https://www.financedigest.com/tesla-to-warn-of-data-privacy-risk-from-car-security-cameras-in-germany.html "Tesla to warn of data privacy risk from car security cameras in Germany") increasing inequality and were at cross purposes with tightening monetary policy. Asked on CNBC about the IMF’s criticism of UK policy, Georgieva said, “This is a message we convey to everybody.” Georgieva urged greater support for emerging markets and developing countries, noting that high interest [rates in advanced economies and the strong dollar](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles") had triggered capital outflows. The probability of portfolio outflows had risen to 40%. She also called on China and private [creditors – who hold the lion’s share of global debt](https://www.financedigest.com/sovereign-debtors-creditors-agree-on-steps-to-jumpstart-debt-restructurings.html "Sovereign debtors, creditors agree on steps to jumpstart debt restructurings") – to address the risk of a widening debt crisis in emerging markets. [(Reporting by Andrea Shalal; Additional reporting by David Lawder and Tim](https://www.financedigest.com/tim-shares-slide-as-reported-grid-bids-disappoint.html "TIM shares slide as reported grid bids disappoint") Ahmann; Editing by Richard Pullin and Andrea Ricci) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---