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The International Monetary Fund (IMF) has issued a horror global economy warning that the “worst is yet to come” and that for many, “2023 will feel like a recession”. World economies have been battered by Russia’s ongoing war in Ukraine, which has sent energy prices in many of the globes biggest countries soaring to astronomical levels. Coupled with the rising cost of living crisis, inflation has skyrocketed to record highs, sending shivers through many they could be in for a freezing winter as they look to save all possible money.
The IMF’s World Economic Outlook report has painted an extremely gloomy picture, warning of an extremely tough year ahead as it cut growth predictions and forecast economic contraction in a third of the world in 2023.
The report from the financial institution said: “The worst is yet to come. For many people 2023 will feel like a recession.”
This latest forecast includes a significant downward revision of the global growth rate for next year, from the amount the IMF said it expected in July.
It has now plunged to just 2.7 percent expected growth – more than halved from the six percent growth seen in 2021 and the 3.2 percent growth forecast for 2022.
Global economy news: The IMF has warned ‘the worst is yet to come’ as recession fears mount
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The IMF said this is the “weakest growth profile” in more than 20 years, which doesn’t take into account the Covid pandemic and the global financial crisis more than a decade ago.
It reflects “significant slowdowns” for the largest economies, which have been fighting an uphill battle throughout most of this year.
The report says: “The world is in a volatile period: economic, geopolitical, and ecological changes all impact the global outlook.”
This World Economic Outlook report was completed before UK Chancellor Kwasi Kwarteng’s mini-budget on September 23, which saw the pound fall to a record low against the US dollar after he announced tens of billions of pounds of tax cuts.
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Nevertheless, when asked about Britain’s economic situation and the turmoil in its government bond market, IMF chief economist Pierre-Olivier Gourinchas told reporters: “Fiscal policy should be aligned with monetary policy.
“Central banks are trying to tighten monetary policy, and if you have at the same time fiscal authorities that try to stimulate aggregate demand, it’s like having a car with two people in the front… each trying to steer the car in a different direction. That’s not going to work very well.”
The IMF concluded the future health of the global economy is reliant on the “successful calibration” of monetary policy, how the Ukraine war pans out, and the possibility of further pandemic-related supply-side disruptions.
The pound plunged again this evening after the Bank of England warned pension funds they have until Friday to balance their books before it removes emergency support for the bond market.
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BoE Governor Andrew Bailey warned those managing pensions “you’ve got three days” to sort out their finances.
The UK’s central bank has been supporting the country’s bond market after markets plunged into turmoil following Mr Kwarteng’s mini-budget, but has declined to extend this support beyond Friday, October 14.
Following the announcement, the pound again quickly nosedived against the US dollar from $1.1178 to $1.0969.
Earlier today, the BoE again attempted to curb a sharp sell-off in Britain’s £2.1trillion Government bond markets by expanding its emergency buying to inflation-linked debt.
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The central bank has now split its programme to buy up to £10billion of British gilts each day to include up to £5billion of index-linked bonds.
This is the bank’s fifth attempt to quell market turmoil in just over two weeks, and piles pressure on Prime Minister Liz Truss just over a month after she took over from Boris Johnson.
The BoE said in a statement: “The beginning of this week has seen a further significant repricing of UK Government debt, particularly index-linked gilts,” the BoE said in a statement.
“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability.”