The IMF also known as the International Monetary Fund stated that there are high chances of a recession and financial instability in the coming year and hence, they are lowering their projections for global economic growth in 2023. A number of factors have contributed to the downfall of the global economy, which include the covid-19 pandemic and its repercussions, the Russia-Ukraine war and certain climatic conditions. The Russia-Ukraine war is one of the major reasons for this downfall and many countries are seeing major impacts of the war on their economies. There is a fundamental shift in the global economy from a stable and predictable economy to a very fragile and uncertain one.
Even the world's largest economies like China, and Europe have been slowing down, which will gradually affect the supply and demand, prices and services of emerging and developing countries.
According to estimations given by IMF, the countries that account for about one-third of the world economies, are likely to see two consecutive quarters of contractions this or next year. Even if the economic growth is positive, rising prices and shrinking incomes may make it feel like a recession and further result in economic downfall.
Kristalina Georgieva, the Managing Director at the IMF said that things are more likely to get worse than better. Another reason for a prolonged future recession can be a sudden increase in prices. She also said that the division of the global economy into blocs supporting, opposing it or sitting on the bench, may not be a great idea. The IMF also indicated slowdowns included the US' GDP contraction in the first half of 2022 and the impact of virus lockdowns in China that came on top of a property market crisis. "Declining real disposable income continues to eat into consumer demand, and higher interest rates are taking an important toll on spending," the IMF said.
However, the IMF said on Tuesday that doing too little to fight inflation now will only make the fight more difficult later. It also requested Governments the world over to strengthen and prepare their nations' fiscal policies from this point on to tackle the inflation crisis that will hit during the peak of the recessionary period.
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