IMF Director: There is a 25% risk of global recession next year
“We think that the risk of global recession is now 25 percent,” International Monetary Fund (IMF) Managing Director Kristalina Georgieva said to the media Thursday.
Responding to journalists’ questions following her statements made at Thursday’s press conference to highlight the Fund’s Global Policy Agenda (GPA), Georgieva explained, “The probability of a recession has gone up. We [The IMF] estimate that one-third of the world economy equivalent will experience two or more consecutive quarters of negative growth.”
It must be noted that the response during the question-and-answer session was less measured than the words of Georgieva’s prepared statement, in which she suggested that the “outlook shows …[a] 25 percent chance that global growth could drop to a historic low of 2 percent next year.”
According to the Fund’s World Economic Outlook (WEO) database, the global economy—save only for the recession years 2009 and 2020—has not seen global growth below 2.5% since 2001.
The anticipated pace of growth is slowed in large part by record-breaking inflation levels not seen in the world economy for several decades. “The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook,” summarizes the Fund in its WEO report for October 2022.
Among the policy priorities highlighted, Georgieva advised policymakers to prioritize “protecting the vulnerable, the vulnerable households, the vulnerable businesses that are so important for the economy to function.”
Acknowledging the fact that governments have limited fiscal buffers, the Fund’s managing director reminded that policy measures should be temporary and targeted toward the most vulnerable. “Steer away from across-the-board fiscal support that is neither effective nor affordable,” cautioned Georgieva. “If we are to help people and fight inflation, we must ensure that the fiscal and monetary policy go hand in hand.”
Global average inflation is forecast at 8.75% in 2022 and 6.5% in 2023. The last time the world economy experienced inflation beyond six percent was in 2008 when it was recorded at 6.3 percent.
Closer to home, the forecast for Belize’s average (year-on-year) inflation rate for 2022 has been revised up to 6.6 percent and at 4.7 percent in 2023. Within the last two decades, the last time Belize’s inflation was above 6 percent was likewise in 2008, when it reached 6.39 percent.