IMF Cuts World GDP Outlook a Third Time as Inflation, Rates Jump

• The International Monetary Fund cut its global growth outlook for this year and next, warning that the world economy may soon be on the cusp of an outright recession. Global economic expansion will likely slow to 3.2% this year, less than the 3.6% forecast by the fund in April and the 4.4% seen in January.
• The series of interest-rate increases that central banks have unleashed to contain inflation “is expected to bite” in 2023, with global output growth set to slow to 2.9%.  While the crisis lender is still forecasting positive growth, that will do little to quell rising concern of receding expansion or even outright recession in major economies as accelerating price increases eat away at incomes, savings and profits.
• Consumer prices have consistently climbed more quickly than expected, with the fund seeing inflation accelerating even further this year as higher food and energy costs couple with lingering supply-and-demand imbalances. It now projects the global consumer-price gauge to increase 8.3% this year (April’s estimate: 7.4%), which would be the biggest jump since 1996.
• Downside risks include a worsening of the war in Ukraine, escalation of sanctions on Russia, a sharper-than-anticipated slowdown in China, renewed Covid-19 flare-ups and an inflation wave that’s forcing central banks to raise interest rates.

(Source: Bloomberg)