‘2023 Will Feel Like a Recession,’ IMF Warns in New Global Growth Forecast

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A new report released Tuesday, Oct. 11, by the International Monetary Fund warns that the financial outlook for the coming year is becoming more and more concerning to experts with “the worst yet to come.” As the IMF projects, even if we are not officially in a recession in 2023, it will still feel like one.

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As part of IMF’s World Economic Outlook Report, the organization says we are in a global “cost-of-living crisis,” with international growth on a sharp downward slope — a mere 2.7% forecasted for 2023. 

That’s down from 3.2% in 2022 and 6.0% in 2021. According to the IMF, that’s the “weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.”

Looking at the U.S. alone, growth is even more dire, expected to rise just 1.0% in 2023.

The lingering effects of the pandemic, coupled with budget-strapped financial situations in many countries (particularly China), the ongoing Russia-Ukraine war and cost-of-living increases have all had a compounded domino effect, says the IMF.

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The organization’s financial warning echoes sentiments being made by the U.N. declaring that the world is on the brink of a recession and the World Bank predicts we are bringing on levels of “stagflation” that were seen in the 1970s, per CNBC.

When it comes to inflation, IMF’s World Economic Outlook Report says that rates will crest at 8.8% before the year is through, but will eventually be on the decline, forecasted for 6.5% in 2023 and 4.1% as of 2024. 

Given that inflation rates will finally come down from their peak, the IMF is calling on global economies to take certain measures to “restore price stability” by “alleviating pressures” from cost-of-living hikes and”fast-tracking” more green energy initiatives to bring down the cost of fuel and natural energy resources that remain at a premium. 

Per CNBC, the cost of natural gas has risen 4x since 2021, much of this due to Russia producing only 20% of its normal levels due to its war with Ukraine. The conflict has also led to a sharp increase in food prices.

The IMF says that greenhouse gas emissions must come down by 25% from 2022 levels in order to avoid “catastrophic climate disruptions” that will also wreak havoc on international markets.

The other delicate balance the IMF warns of is the wage-price balance, as wages go up to combat inflation, so could prices for goods creating an undesirable situation where they “feed off each other.” 

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The U.S. and China are two of the biggest global economies that must be monitored and strategized effectively to prevent a trickle-down effect for emerging world markets, says the IMF. The American dollar continues to strengthen against diminishing global currencies and China’s “zero COVID policy” that has effectively shut down the country has had a tremendous international impact, says CNBC.

IMF’s forecast comes as the Federal Reserve continues to spike interest rates as a method to try to bring down inflation with many analysts wondering if that is the right course. As the New York Times notes in their analysis of the IMF report, a worldwide recession is on the line “if policymakers mishandle the fight against inflation.”

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The paper shares that the IMF’s World Economic Outlook is released as international economic figureheads are en route to D.C. for the annual gatherings of the IMF and World Bank.

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About the Author

Selena Fragassi joined GOBankingRates.com in 2022, adding to her 15 years in journalism with bylines in Spin, Paste, Nylon, Popmatters, The A.V. Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently resides in Chicago with her rescue pets and is working on a debut historical fiction novel about WWII. She holds a degree in fiction writing from Columbia College Chicago.
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