WASHIINGTON–The International Monetary Fund is warning the world economy is headed for “stormy waters” as it has downgraded its global growth projections for 2023, going as far as to caution a harsh worldwide recession lies ahead if policymakers mishandle the fight against inflation.
The tough forecast was included in the fund’s closely watched World Economic Outlook report, which was published in conjunction with the annual meetings of the World Bank and the IMF.
The economic picture is cloudy to due supply chain disruptions, Russia’s war in Ukraine, and surges in energy and food prices over the last year. That has led the central bank, including the Federal Reserve in the U.S., to raise interest rates sharply as they seek to cool off their economies.
“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the International Monetary Fund report said.
The IMF maintained its most recent forecast that the global economy will grow 3.2% this year, but it is now projecting it will slow to 2.7% in 2023, slightly lower than its previous estimate and well below its forecast at the beginning of the year.
Forecast for U.S.
The IMF forecast the U.S. economy will grow 1.6% this year, a downgrade from its previous projection, and 1% in 2023. In China, lockdowns to prevent the spread of Covid-19 continue to drag on its economy, which is projected to grow 3.2% this year after expanding 8.1% in 2021, the IMF said.
While the slowdown is painful, the IMF warned that doing too little to combat inflation would make the fight more costly later and it urged governments should avoid enacting fiscal policies that would make inflation worse.
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