IMF Warns Deeper Financial Turmoil Would Slam Global Growth

• The International Monetary Fund trimmed its 2023 global growth outlook slightly as higher interest rates cool activity but warned that a severe flare-up of financial system turmoil could slash output to near recessionary levels.
• The IMF said in its latest World Economic Outlook report that banking system contagion risks were contained by strong policy actions after the failures of two U.S. regional banks and the forced merger of Credit Suisse. However, the turmoil added another layer of uncertainty on top of stubbornly high inflation and spillovers from Russia's war in Ukraine.
• "With the recent increase in financial market volatility, the fog around the world economic outlook has thickened," the IMF said as it and the World Bank launch spring meetings this week in Washington. "Uncertainty is high and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled," the Fund added.
• The IMF is now forecasting global real GDP growth at 2.8% for 2023 and 3.0% for 2024, marking a sharp slowdown from 3.4% growth in 2022 due to tighter monetary policy. Both the 2023 and 2024 forecasts were marked down by 10 basis points from estimates issued in January, partly due to weaker performances in some larger economies as well as expectations of further monetary tightening to battle persistent inflation.

(Source: Reuters)