In a stability report published on Tuesday, the IMF said there was a growing risk that the global economy could fall into recession next year as households and businesses in most countries face “rough waters”.

See the full report here..

China’s policy of zero infection with COVID-19 and the need to raise interest rates to control inflation, combined with high energy and food prices following Russia’s invasion of Ukraine, will reduce global economic growth from 3.2% in 2022 to 2.7% in the future , the Foundation estimates.

The growth forecast for 2023 is the lowest since 2001, excluding the pandemic and global financial crisis years.

IMF economists also say that the probability of global GDP falling below 2% is 25%. Over the past half century, such low growth rates were observed only in 1973, 1981, 1982, 2009 and 2020.

In an interview with the Financial Times, Pierre-Olivier Gurincha, head of research at the IMF, said there was a 15 percent chance that global growth would fall below 1 percent. That level would likely mark the edge of a recession and be “very, very painful for a lot of people.”

“We are not in a crisis yet, but things are not looking good,” he said, adding that 2023 would be the “darkest moment” for the global economy.

While a sharp rise in interest rates around the world has hurt growth, the IMF said it was needed to keep inflation under control and put the global economy on a more stable footing.

The fund predicts that consumer price growth in emerging economies will peak at nearly 10% this year before falling to 8.1% in 2023.

“You have central banks on the front line. This is their job, this is their authority [și] their entire reputation is at stake,” said Gurinchas. The fund said monetary authorities should “stay the course” and not repeat the mistakes of the 1970s, when most monetary policymakers lacked the courage to raise interest rates further when their economies slowed or stagnated.

The IMF has criticized Britain’s economic policy, advising countries not to pursue expansionary policies in taxation and public spending, despite rising energy and food prices.

According to Gurinchas, it is necessary to reduce the deficit and restore fiscal reserves. “Otherwise, it will only continue the struggle to reduce inflation, the risk of overcoming inflationary expectations, increasing financing costs and causing financial instability, complicating the task of tax authorities,” he added.

Likening it to a car driven by two drivers, each with their own steering wheel, Gurinchas told the FT that contrasting fiscal and monetary policies have left financial markets asking: “Which way is the car going?” Are we really fighting inflation or stimulating economic activity?”