Recession can't be ruled out, IMF says

WASHINGTON－The head of the International Monetary Fund said on Wednesday that the outlook for the global economy had "darkened significantly" since April and she could not rule out a possible recession next year given elevated risks.

IMF Managing Director Kristalina Georgieva told Reuters the fund would downgrade its 2022 forecast in the coming weeks for 3.6 percent global economic growth for the third time this year, adding that IMF economists were still finalizing the new numbers.

The IMF is expected to release its updated forecast for 2022 and 2023 in late July, after slashing its forecast by nearly a full percentage point in April. The global economy expanded by 6.1 percent last year.

"The outlook since our last update in April has darkened significantly," she told Reuters in an interview, citing factors such as a more universal spread of inflation, more substantial interest rate hikes, and escalating sanctions related to the Russia-Ukraine conflict.

"We are in very choppy waters," she said. When asked if she could rule out a global recession, she said: "The risk has gone up so we cannot rule it out."

Recent economic data showed some large economies, including Russia, had contracted in the second quarter, she said, noting the risks were even higher in 2023. "It's going to be a tough 2022, but maybe even a tougher 2023," she said.

Investors are growing increasingly concerned about recession risks, with a key part of the US Treasury yield curve inverted for a second straight day on Wednesday, in what has been a reliable indicator that a recession is looming.

Federal Reserve Chair Jerome Powell said last month that the US central bank was not trying to engineer a recession, but was fully committed to bringing prices under control even if doing so risked an economic downturn.

Georgieva said a longer-lasting tightening of financial conditions would complicate the global economic outlook, but added it was crucial to get surging prices under control.

The global outlook was more heterogeneous now than just two years ago, with energy exporters, including the US, on a better footing, while importers were struggling.

Slower economic growth may be a "necessary price to pay" given the urgent and pressing need to restore price stability, she said.

Agencies Via Xinhua