The International Monetary Fund has warned that a global economic recession could be apparent next year if the war in Ukraine and other economic shocks persist in the near term.
The projections for the growth rate of the global output (Gross Domestic Product) this year remain 3.2 percent as earlier predicted, down from 6 percent in 2021, and is forecast to reduce further to 2.7 percent in 2023.
The global slowdown is a result of the Russian war in Ukraine, rising costs of living caused by persistent and relentless inflation pressures, and the reduced economic activity in China due to consistent lockdowns, dimming the global growth prospects, IMF said.
“The 2023 slowdown will be broad-based, with countries accounting for a third of the global economy expected to contract this year or next,” said Pierre-Olivier Gourinchas, IMF’s chief economist and research director.
“The worst is yet to come, and for many people, 2023 will feel like a recession. Despite the slowdown, inflation pressures are proving broader and more persistent than anticipated.”
Global inflation is expected to peak at 9.5 percent in the third quarter of 2022, and is broadening beyond food and energy, IMF said.
Should the war in Ukraine persist, inflation continue to broaden and the dollar continue to appreciate, IMF says, there is a 25 percent chance GDP growth could drop to below two percent and a 10 percent chance it could reduce to 1.1 percent.
“Increasing price pressures remain the most immediate threat to present and future prosperity by squeezing real incomes and undermining microeconomic stability,” Mr Gourinchas said.
The growth rate in Sub-Saharan Africa is projected to drop to 3.6 percent in 2022 down from 4.7 percent last year.