IMF Managing Director: "Risk of Recession in 2023 Increased... Growth Forecast to Be Lowered Soon"

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] "2022 will be a difficult year, but 2023 could be even tougher. The risk of an economic recession in 2023 has increased."

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), warned on the 6th (local time) about the heightened risk of recession and stated that the IMF will revise downward its global economic growth forecasts again within a few weeks. This would be the third downward revision.

According to major foreign media, following the downgrade of economic growth forecasts in April, the IMF will release updated economic growth forecasts for 2022 and 2023 around the end of July.

Georgieva said, "The outlook has darkened significantly since the last update in April," citing inflation, interest rate hikes, China's economic slowdown, and sanctions resulting from Russia's invasion of Ukraine. She diagnosed, "We are now in very turbulent waters."

When asked about the possibility of a global recession, she responded, "Since the risks have increased, we cannot rule out the possibility of falling into a recession."

Georgieva mentioned that the economies of some countries, including China and Russia, contracted in the second quarter, and predicted, "2022 will be a difficult year. But 2023 could be even more difficult." This is a warning that the risk of recession in 2023 has increased.

On the same day, an inversion occurred in the New York bond market, where short-term interest rates exceeded long-term rates. Such an inversion of short- and long-term interest rates is generally considered a precursor to a recession.

Along with this, Georgieva emphasized that while prolonged tightening by central banks will complicate the global economic outlook, it is important to curb soaring inflation. Considering the urgency of price stability, some degree of economic slowdown may be "an essential price to pay."

The U.S. central bank, the Federal Reserve (Fed), also reaffirmed its intention to continue raising the benchmark interest rate despite concerns about some growth slowdown, in order to suppress inflation, through the minutes of the Federal Open Market Committee (FOMC) regular meeting released on the same day.