A “The risks to the outlook are overwhelmingly tilted to the downside,” the I.M.F. said
According to the report, the likelihood of a global recession is rising. It said the probability of a recession starting in one of the Group of 7 advanced economies was now nearly 15 percent, four times its usual level. And it said some indicators suggested that the United States was already in a “technical” recession, which the I.M.F. defines as two consecutive quarters of negative growth.
Data set for release on Thursday is expected to show that the U.S. economy grew little or perhaps shrank in the second quarter of 2022.
At a news conference following the release of the report, Mr. Gourinchas added that the I.M.F. was not currently projecting that the United States was in a recession and that even if its economy contracted in the second quarter, defining a recession can be complicated.
“The recession in the way it is defined typically is looking at more than just output, you want to take into account the strength of the labor market,” Mr. Gourinchas said. “The general assessment as to whether the economy is in a recession overall is a little bit more complex.”
Mr. Gourinchas also suggested that the kind of “soft landing” that the Fed was trying to engineer — where it cools the economy just enough without setting off a recession — would be difficult to achieve.
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The I.M.F. warns that a global recession could soon be at hand.
The International Monetary Fund downgraded its growth forecasts and projected higher inflation around the world
The world could soon be on the brink of a global recession as the economies of the United States, China and Europe slow more sharply than anticipated amid a collision of crises, the International Monetary Fund warned on Tuesday.
In an update of the World Economic Outlook, the I.M.F. said economic prospects had darkened significantly in recent months as war in Ukraine, inflation and a resurgent pandemic inflicted pain on every continent. If the thicket of threats continues to intensify, the world economy faces one of its weakest years since 1970, a period of intense stagflation across the globe.
“The world may soon be teetering on the edge of a global recession, only two years after the last one,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, wrote in a blog post accompanying the report. Put simply, the outlook for the global economy is “increasingly gloomy,” he wrote.
The I.M.F. downgraded its global growth forecasts from its April projections, predicting that output will fall to 3.2 percent in 2022, from 6.1 percent last year. Growth is expected to slow even further next year as central banks around the world raise interest rates in an effort to tame inflation by cooling their economies.
Inflation is also rising more rapidly and broadly than the I.M.F. anticipated earlier this year. It now expects prices to rise 6.6 percent in rich countries and 9.5 percent in emerging markets and developing economies.
The international group also warned of another problem that could emerge as the Fed raises interest rates. Higher rates are expected to further strengthen the U.S. dollar as investors plow into Treasury bonds that offer lucrative returns. The I.M.F. said inflation in emerging markets could be amplified as the appreciation of the dollar made the imports that they bought with their local currencies more expensive.
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