FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo

International Monetary Fund cuts growth forecast for 2023

Amidst high volatility in the global economy and increasing inflation rates in major economies, International Monetary Fund is reportedly planning to cut growth projections for 2023. Few months ago in July 2022, International Monetary Fund had slashed growth projections for 2023 by nearly 70 basis points to 2.9 percent. IMF also slashed growth projections for 2022 to 3.2 percentage in July.

High inflation rates in the developed and developing economies  forced central banks in those countries to hike benchmark interest rates in order to reduce cash flow in the economy. The increasing interest rates are likely to push several major economies in the world into a recession like economic scenario. It is also expected to have huge impact on the growth prospects of the global economy.

Managing Director of International Monetary Fund Kristalina Georgieva said on Friday that the chances of a global economic recession is increasing as numerous economies will face economic contractions for atleast two quarters in the years to come. Kristalina was interacting with audience during an address at Georgetown University.

According to Kristalina even if some countries post growth in their economies, they will feel like living in a recession period as real income will come down and prices of essential commodities will go up.

Reports suggest that international monetary fund is expecting a a global output loss of about $4 trillion between now and 2026.

“This is the size of the German economy — a massive setback for the world economy. And it is more likely to get worse than to get better,” the managing director said during the address.

High instability in the international commodity markets , high difference in the prices and volatility would have big negative impacts on the growth of global economy in the years to come.

Increasing interest rates are not only going to impact national economies but also day to day life of ordinary citizens and cash flow will reduce rapidly in the general Economy.

During the address she also stated that developing economies would be the worst affected in the economic crisis as capital will continue to flow out of such economics. Strengthening dollar will also force investors to find new places to park the funds in safer manner.

Russian invasion of Ukraine and sanctions by Western countries had triggered an energy crisis in Europe to be specific. This resulted in oil and has prices Sky rocketing in the international market. All these led to high inflation rates in both developed by and developing economies.