World Faces Increasing Risk Of Recession In Next 12 Months, Says IMF Chief

IMF MD Kristalina Georgieva said the supply disruptions and commodity price shock from the Ukraine-Russia war had exacerbated the cost-of-living crisis for crores of people

Kristalina Georgieva, the head of the International Monetray Fund (IMF) said the outlook for the global economy has "darkened significantly" in the recent months and the world faces an increasing risk of recession in the next 12 months, citing The Guardian, news agency IANS reported on Thursday.

The supply disruptions and commodity price shock from the Ukraine-Russia war had exacerbated the cost-of-living crisis for crores of people, Kristalina Georgieva said and it was "only getting worse".

She said inflation was also higher than expected. According to the latest figures on Wednesday, consumer prices in the US rose at a 40-year high of 9.1 per cent in June.

Economists and investors now think the US Federal Reserve could hike interest rates by a historic 1 per cent when its board meets in two weeks' time.

Central banks across the world have raised base rate to tame the surging inflation.

The Bank of Canada shocked markets on Wednesday by raising its base rate by a full percentage point, while the Reserve Bank of New Zealand increased its benchmark rate by 0.5 per cent this week, as did the Bank of Korea.

Along with another expected move higher by the Fed, this keeps heaping pressure on other central banks to follow suit to bring inflation under control.

With supply bottlenecks and repeated Covid-19 lockdowns in China also crimping the world's patchy pandemic recovery, Georgieva said the G20 finance ministers and central bankers gathering in Bali "face a global economic outlook that has darkened significantly".

"It is going to be a tough 2022 - and possibly an even tougher 2023, with increased risk of recession," The Guardian reported.

The IMF would be downgrading its growth forecasts for global growth for both 2022 and 2023 later this month, she said, having warned in April that its forecast of 3.6 per cent was likely to be revised downwards.

The European Central Bank is under pressure to raise interest rates to combat inflation and protect the euro, which this week slumped to parity with the US dollar for the first time in two decades.