The International Monetary Fund (IMF) pulled no punches when predicting the near future for the global economy, and the outlook is not what most wish to see.
Director Kristalina Georgieva said Thursday that multiple factors including inflation, shortages in the food and energy industries, the Ukraine war, higher unemployment and global recession will combine to create a less positive “new normal.”
Describing “shock after shock after shock,” Georgieva declared that these waves have in the past three years “inflicted immeasurable harm on people’s lives.”
The results have been a global surge in prices, pushing the cost of living even higher — especially in the sensitive and essential areas of food and energy.
The combination will result in a global output loss of an estimated $4 trillion by 2026, and economic growth projections were lowered for this year and 2023.
Speaking at Georgetown University, the Bulgarian Georgeiva acknowledged that the global economy has shifted away from being relatively predictable. Instead, now it is fraught with greater uncertainty.
Factors contributing to the more fragile economic condition include the COVID-19 pandemic, the Ukraine war and climate threats, Georgeiva told the attendees.
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She ominously predicted that things are likely to “get worse before it gets better,” and warned that recession risks are rising. The current economic environment, she said, is characterized by a time of “historic fragility.”
The IMF director’s observations come as central banks around the globe hike interest rates in hopes of bringing down inflation. The U.S. Federal Reserve has aggressively raised rates for months, and institutions from Asia to England are now following suit.
The Fed worries — and Georgieva warned — that contracting the money supply too quickly and by too much could plunge fragile economies into prolonged recession. The so-called “soft” landing sought by world bankers may instead transform into a harsh contraction.
Her comments come on the heels of OPEC+ deciding this week to cut production sharply to prop up dropping oil prices. This politically sensitive move could very well strike another blow to the global economy. It also comes ahead of the U.S. midterm elections next month.