IMF Slashes Global Growth Forecast: Teetering on the Edge of a Global Recession

The global economy may soon be teetering on the edge of a recession and will likely grow more slowly than previously expected this year and next year, the International Monetary Fund said Tuesday.

“The global economy is facing an increasingly gloomy and uncertain outlook. Many of the downside risks flagged in our April World Economic Outlook have begun to materialize,” International Monetary Fund (IMF) chief economist Pierre-Olivier Gourinchas said in a blogpost accompanying the Washington-based institute’s report.

The IMF now expects the world economy to grow 3.2 percent this year, down from the April projection of 3.6 percent. Next year, global growth is expected to slow to 2.9 percent, 0.7 percent below the earlier forecast.

“The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one,” Gourinchas said.

A general rule of thumb is that global growth below two percent qualifies as a recession. While national recessions typically involve negative growth over two quarters, the global economy almost never shrinks so a very low level of growth is considered a slump.

The report cited central bank tightening, Russia’s invasion of Ukraine, and China’s Covid lockdowns as slowing economic growth.

“Higher-than-expected inflation, especially in the United States and major European economies, is triggering a tightening of global financial conditions. China’s slowdown has been worse than anticipated amid COVID-19 outbreaks and lockdowns, and there have been further negative spillovers from the war in Ukraine. As a result, global output contracted in the second quarter of this year,” Gourinchas said.

Advanced economies are expected to grow 2.5 percent this year and to slow to 1.4 percent next year. The IMF projects that Spanish GDP will grow 4.0 percent this year and 2.0 percent in 2023, the best growth among the the group. The U.S. economy is seen as growing 2.3 percent this year and 1.0 percent next year. Germany’s economy is seen as the weakest, growing just 1.2 percent this year and 0.8 percent next year.

Growth in emerging and developing economies is projected to hit 3.6 percent this year and rise to 3.9 percent next year. China is expected to grow 3.3 percent in 2022 and 4.6 percent next year.