IMF dims outlook for 2023 global economy amid Ukraine war

The International Monetary Fund is downgrading its outlook for the world economy for 2023 citing a long list of threats that include Russias war against Ukraine chronic inflation pressures punishing interest rates and the lingering consequences of the global pandemicThe 190country lending agency forecast Tuesday that the global economy would eke out growth of just 27per cent next year down from the 29per cent it had estimated in July The IMF left unchanged its forecast for international growth this year a modest 32per cent a sharp deceleration from last years 6per cent expansionThe bleaker forecast was no surpriseIMF Managing Director Kristalina Georgieva noting the grim backdrop to this weeks fall meetings of the IMF and the World Bank in Washington warned that the risks of recession are rising around the world and that the global economy is facing a period of historic fragilityAlso read Gita Gopinath to become IMFs first deputy managing director early 2022In its latest estimates the IMF slashed its outlook for growth in the United States to 16per cent this year down from a July forecast of 23per centIt expects meagre 1per cent US growth next yearThe fund foresees Chinas economy growing just 32per cent this year down drastically from 81per cent last yearBeijing has instituted draconian zeroCOVID policy and has cracked down on excessive real estate lending disrupting business activity Chinas growth is forecast to accelerate to 44per cent next year still tepid by Chinese standardsIn the IMFs view the collective economy of the 19 European countries that share the euro currency reeling from crushingly high energy prices caused by Russias attack on Ukraine and Western sanctions against Moscow will grow just 05per cent in 2023The world economy has endured a wild ride since COVID19 hit in early 2020 First the pandemic and the lockdowns it generated brought the world economy to a standstill in the spring of 2020Then vast infusions of government spending and ultralow borrowing rates engineered by the Federal Reserve and other central banks fuelled an unexpectedly strong and speedy recovery from the pandemic recessionBut the stimulus came at a high costFactories ports and freight yards were overwhelmed by powerful consumer demand for manufactured goods especially in the United States resulting in delays shortages and higher pricesThe IMF expects worldwide consumer prices to rise 88per cent this year up from 47per cent in 2021In response the Fed and other central banks have reversed course and begun raising rates dramatically risking a sharp slowdown and potentially a recessionThe Fed has raised its benchmark shortterm rate five times this yearHigher rates in the United States have lured investment away from other countries and strengthened the value of the dollar against other currenciesOutside the United States the higher dollar makes imports that are sold in the American currency including oil more expensive and therefore heightens global inflationary pressuresIt also forces foreign countries to raise their own rates and burden their economies with higher borrowing costs to defend their currenciesMaurice Obstfeld a former IMF chief economist who now teaches at the University of California Berkeley has warned that an overly aggressive Fed could drive the world economy into an unnecessarily harsh contractionThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever