WASHINGTON — The outlook for the world economy this year hasactually dimmed in the face of chronically high inflation, increasing interest rates and unpredictabilities resulting from the collapse of 2 huge American banks.
That’s the view of the International Monetary Fund, which on Tuesday reduced its outlook for international financial development. The IMF now imagines development this year of 2.8%, down from 3.4% in 2022 and from the 2.9% quote for 2023 it made in its previous projection in January.
The fund stated the possibility of a “hard landing,” in which increasing interest rates compromise development so much as to cause a economiccrisis, has ”risen greatly,” specifically in the world’s mostaffluent nations. Those conditions are likewise increasing the threats to worldwide monetary stability, the fund cautioned.
“The circumstance stays delicate,” Pierre-Olivier Gourinchas, the IMF’s chief economicexpert, informed pressreporters Tuesday. ”Downside dangers predominate.”
The IMF, a 190-country loaning company, is forecasting 7% international inflation this year, down from 8.7% in 2022 however up from its January projection of 6.6% for 2023.
“Inflation is much stickier than preparedfor even a coupleof months ago,’’ Gourinchas composed in the IMF’s newest World Economic Outlook.
Persistently high inflation is anticipated to force the Federal Reserve and other main banks to keep raising rates and to keep them at or near a peak longer to fight rising rates. Those ever-higher loaning expenses are anticipated to compromise financial development and possibly destabilize banks that had come to rely on traditionally low rates.
Already, Gourinchas alerted, greater rates are “starting to have major side results for the monetary sector.’’
The fund’s yearly Global Financial Stability Report, likewise launched Tuesday, provided suggestions for global decisionmakers:
“Policymakers might requirement to change the position of financial policy to assistance monetary stability” — that is, potentially reconsider the rate of interest rate walkings that are meant to cool inflation.
The fund anticipates a 25% possibility that international development will fall listedbelow 2% for2023 That has occurred just 5 times consideringthat 1970, most justrecently when COVID-19 thwarted worldwide commerce in 2020.
The IMF likewise imagines a 15% possibility of a “severe disadvantage circumstance,” typically associated with a worldwide economiccrisis, in which aroundtheworld financial output per individual would diminish.
The international economy, the fund alerted in Tuesday’s report, is “entering a dangerous stage