The heads of the International Monetary Fund (IMF) and the World Bank on Monday warned of economic headwinds that are raising the risk of a global financial recession.
“There’s the risk and the real danger of a world recession next year. The advanced economies are slowing in Europe and so we’ll see where it goes into next year,” World Bank Group President David Malpass told IMF Managing Director Kristalina Georgieva during their discussion.
“But the currency depreciation means that the debt levels for the developing countries are getting more and more burdensome,” Malpass added. “The rise in interest rates puts added weight on it. And inflation is still a major problem for everyone, but especially for the poor.”
Georgieva noted that the IMF has calculated that one-third of the world’s economy will have had at least two consecutive quarters of negative growth this year, with the slowdown costing some $4 billion to the global economy between not and 2026.
“We are seeing slow down in all three key economies of the world,” she said. “Eurozone, because primarily of gas prices shooting up. China, because of COVID disruptions and the volatility of the housing sector, we see a very significant problem in China dragging down growth,” Georgieva said. “And in the United States, still very strong labor market, but also losing a bit of momentum because interest rates are starting to bite.”
Malpass and Georgieva’s remarks come as the Federal Reserve has been raising interest rates throughout this year in an effort to slow record inflation, raising concerns that the U.S. could be headed for a recession.