IMF cuts global growth forecast, saying 2023 will ‘feel like a recession’ for many people

The International Monetary Fund (IMF) on Tuesday reduced its forecast for global economic growth for 2023, saying that next year will “feel like a recession” for many people. 

The IMF said in a blog post that its outlook for 2022 remained unchanged from its July prediction of 3.2 percent growth, but it lowered its 2023 prediction by 0.2 points, to 2.7 percent growth. It said the economic slowdown will be widespread, with countries making up one-third of the global economy projected to experience an economic contraction this year or next. 

“Overall, this year’s shocks will re-open economic wounds that were only partially healed post-pandemic,” the IMF stated. “In short, the worst is yet to come and, for many people, 2023 will feel like a recession.” 

The updated prediction comes after the managing director of the agency said at Georgetown University last week that the world is seeing a shift in its economic outlook from relative stability to unpredictability. She said the IMF expects a $4 trillion loss in global economic output from now through 2026. 

The IMF said Tuesday that the tightening of monetary and financial conditions will slow economic growth within the United States to 1 percent next year. 

The Federal Reserve has raised interest rates by 0.75 percentage points three times in a row, causing some economic analysts to express concerns that the bank’s actions to fight inflation could lead to a recession. Fed Chairman Jerome Powell has signaled a willingness to take necessary measures to get inflation under control, even if it causes an economic downturn. 

The IMF lowered China’s growth forecast to 4.4 percent due to a weakened property sector and continued lockdowns related to the COVID-19 pandemic. 

The agency’s blog post states that the Eurozone will experience the most significant economic slowdown as a result of the energy crisis triggered by the war between Russia and Ukraine. Growth is only expected to reach 0.5 percent in 2023. 

Russian President Vladimir Putin has largely cut off European access to Russia’s supply of natural gas through the Nord Stream pipelines in light of Europe’s continued support of Ukraine. Putin has tried to place increased economic pressure on Europe to reduce its resolve to stand with Kyiv. 

The IMF said that inflationary pressure is proving to be broader and more persistent than originally expected despite the projected economic slowdowns. The agency expects global core inflation — the cost of goods and services not including food and energy — to peak at 9.5 percent and decelerate to 4.1 percent by 2024. 

The agency said Russia’s invasion of Ukraine, a cost-of-living crisis caused by lingering inflation and the economic slowdown in China are the main factors shaping the global economic outlook.