- The International Monetary Fund is gearing up to slash growth forecasts again.
- Kristalina Georgieva wrote that “downside risks” have worsened since the last G20 meeting.
- She cited war in Ukraine, high inflation, and COVID lockdowns in China as worrying trends.
The International Monetary Fund plans to cut its global economic growth forecast for later in July, managing director Kristalina Georgieva wrote in a blog post Wednesday.
She cited previous concerns over “downside risks” that have worsened since the last G20 meeting in April, including the ongoing war in Ukraine, 41-year high inflation and the reverberations from COVID-19 lockdowns in China as driving the need to lower expectations.
“It’s going to be a tough 2022 – and even possibly a tougher 2023, with increased risk of recession,” she said.
Georgieva’s comments follow mounting recession calls on Wall Street that have been pushing stocks deeper into a bear market. Some experts expect to see a recession in 2023, while inflation runs at a record-high clip and energy supply chains remain hobbled by the war in Europe. The mixed bag is worrying, Georgieva said, and necessitates “decisive action and strong international cooperation, led by the G20.”
Georgieva provided an outline to navigating the tumultuous economic picture. She noted three priorities taken from a new surveillance note to the G20 ahead of the group’s next meeting. First among them is taming inflation while central banks continue to tighten monetary policy despite the potential for an economic slowdown.
Second, she said, is the need for fiscal policy to work in concert with central banks to dampen inflation despite some countries facing significantly higher debt burdens.
“Shifting away from extraordinary fiscal support will help tamp down demand and thus reduce price pressures,” Georgieva said.
Third, she concluded by saying global leaders must work together more closely in the future to help stem economic fallout and “avoid potential crisis and boost growth and productivity.”