Predictability of the Global Economy is Giving Way to Grow Uncertainty: IMF MD

IMF Managing Director Georgieva stated in a significant policy speech prior to the annual meeting of the International Monetary Fund (IMF) and the World Bank that the World Economic Outlook, which will be released next week, will significantly reduce the global growth predictions.  

IMF chief Kristalina Georgieva has warned that the world economy is transitioning from one of relative predictability to one of greater uncertainty and that countries accounting for about one-third of the global economy will experience at least two consecutive quarters of contraction this or next year. 

The World Economic Outlook, which will be released next week, will further reduce the global growth predictions, IMF Managing Director Georgieva said in a significant policy speech delivered here ahead of the annual meeting of the International Monetary Fund (IMF) and the World Bank.  

Our growth predictions have already been reduced three times, to only 3.2% for 2022 and 2.9% for 2023. We will reduce growth for next year, as you will see in our updated World Economic Outlook that will be released next week, she added.  

We will signal the increasing likelihood of a recession. We predict that this or next year, the economies of roughly one-third of the world’s countries will contract for at least two consecutive quarters.  

Between now and 2026, we predict a $4 trillion global output loss. The size of the German economy represents a significant setback for the global economy. She added that the situation was more likely to deteriorate than improve. She stated that there could be even more economic shocks while noting that uncertainty is still at an all-time high in the context of war and pandemic.  

Risks to financial stability are increasing, she added, and quick and erratic asset price changes might be made worse by pre-existing weaknesses including high sovereign debt and worries about liquidity in important financial market areas. 

The world economy is undergoing a profound change right now: from a relatively predictable environment with a rules-based system for global economic cooperation, low interest rates, and low inflation. Georgieva continued, “We are moving from a world of relative stability to a world of greater fragility, greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters, a world in which any country can be thrown off course more easily and more frequently.”