The International Monetary Fund has cut its economic forecasts for 2023 again, saying the countries that make up one-third of the global economy will contract by at least two-quarters this year or next.This is because Russia’s aggression against Ukraine will disrupt global markets
“The situation is likely to get worse before it gets better,” IMF Managing Director Kristalina Georgieva told an audience at Georgetown University on Thursday, adding that the invasion of Moscow, which began in February, dramatically changed the outlook for the IMF. said it was changed to
“Recession risks are rising,” she said. The U.S. economy has already contracted for the second straight quarter, which is part of the informal definition of a recession, but economists say jobs are generally strong this year.
With the IMF’s bleak economic outlook coming to light less than a month before the midterm elections, the Biden administration and Democrats are grappling with voter anger over inflation, which has reached a 40-year high.
American workers have effectively endured the biggest wage cuts in a quarter century, according to data released this week by the Federal Reserve.
“We found that the majority of the real (inflation-adjusted) wages of employed workers have not kept up with last year’s inflation,” said researchers at the Federal Reserve Bank of Dallas. “For these workers, the median decline in real wages is just over 8.5%. Taken together, these results appear to be the most severe that employed workers have faced in the last 25 years. ”
See also: White House doubles down on calls for Big Oil to cut profits as Democrats uneasy about OPEC cuts
American households were already facing a tough time making ends meet this summer as the average price of gasoline hit a record high of $5 a gallon. Gas prices are up about 20 cents again from his mid-September lows. This was even before OPEC+ countries decided to cut oil production by 2 million barrels a day this week.
President Biden on Thursday called OPEC’s decision “disappointing” while en route to New York and New Jersey for a large Democratic fundraiser.
Republicans on the House Ways and Means Committee said there is “little optimism for the good jobs report” on Friday when the Labor Department releases its September employment numbers. More than 10% believe there will be a recession next year, with just a third of business leaders pointing out that they believe it will be a ‘short-term’ or ‘moderate’ recession.
“The majority of workers are stressing their finances amid rising prices, with more than 20% reporting using emergency savings to pay their bills,” the committee’s Republicans said in a statement. Another 20% report working overtime.”
Ms Georgieva said the IMF has already cut its global growth forecast three times. Now in 2022 she is expected to grow by 3.2% and in 2023 she is expected to grow by 2.9%.
The ongoing COVID-19 pandemic, rising inflation and worsening climate conditions are hitting the global economy and exacerbating other crises such as food insecurity and high debt levels in low-income countries.
“And even with positive growth, shrinking real incomes and rising prices will make it feel like a recession,” she said.
The grim forecast comes as central banks around the world are raising interest rates in hopes of curbing rising inflation. Central banks from Asia to the UK have started to raise rates as well, but the Fed is the most aggressive in using rate hikes as a tool to curb inflation.
Federal Reserve Bank of Chicago Governor Charles Evans said Thursday that the U.S. central bank’s policy rate is likely to move from 4.5% to 4.75% by spring 2023 as the Fed raises borrowing costs to curb too-high inflation. Stated. After the central bank raised him 0.75 percentage points in September, the current interest rate he is targeting between 3.0% and 3.25%.
“We need to go further,” Evans said at the Illinois Chamber of Commerce annual meeting in Chicago. “Inflation is currently high, requiring a more restrictive set of monetary policies.”
“Excessive and rapid monetary policy tightening, and synchronized tightening across countries, could push many economies into a prolonged recession,” Georgieva said.
“We are experiencing a fundamental shift in the global economy from a relatively predictable world to a more fragile one. Greater uncertainty, higher economic volatility, geopolitical conflict, And more frequent and devastating natural disasters and so on,” she said.
In many countries, the invasion of Ukraine has already had a major economic impact, and the IMF’s grim projections are in line with other forecasts for slower growth.
The Organization for Economic Co-operation and Development said last week that the global economy would lose $2.8 trillion in output in 2023 due to war.
• Part of this article is based on news agency reports.
https://www.washingtontimes.com/news/2022/oct/6/risk-recession-rising-russian-invasion-ukraine-inf/?utm_source=RSS_Feed&utm_medium=RSS Inflation hits global economy as Russia’s invasion of Ukraine heightens risk of recession, warns IMF