IMF Slashes Global Economic Forecast
Facts
- In its bi-annual World Economic Outlook published Tuesday, the Washington-based International Monetary Fund (IMF) warned that a third of the world's economy would face a recession next year and advised central banks to "stay the course" in raising interest rates.
- The IMF reduced its 2.9% global growth forecast from July to just 2.7%, though it remains at 3.2% for 2022. According to IMF chief economist Pierre-Olivier Gourinchas, the world's three largest economies — the US, China, and the eurozone — "will continue to stall" in 2023.
- While US growth is predicted to reach 1.6% this year, eurozone growth is forecast at just 0.5% as Europe struggles with spiking gas and energy costs. Following the British government's proposed tax cuts, instability in UK markets has also weakened the pound, with Gourinchas advising that politicians need to unify with the Bank of England to devise a coherent fiscal strategy.
- Meanwhile, growth in China has been revised to a reduced projection of 3.2% in 2022 and 4.4% the following year. Strict responses to COVID outbreaks have stalled the country's productivity and contributed to global supply chain delays, while the nation's property sector — which makes up roughly 20% of the country's economic activity — has seen a rapid decline.
- Michael Gapen, the chief economist for the Bank of America, has said he expects around six months of relatively high unemployment and a "mild" recession. He also warned that hawkish rises in interest rates by the US Federal Reserve (Fed) might dampen a potential bounceback from an anticipated loss of approximately 175k jobs per month in early 2023.
- Global inflation is expected to hit a high of 8.8% this year before declining to 6.5% in 2023.
Sources: Guardian, Al Jazeera, CNN, Daily Caller, and New York Times.
Narratives
- Republican narrative, as provided by Townhall. Despite Biden's claims that he's leading the US through this historically turbulent economic period, Americans are facing a looming recession, inflation at a four-decade high, and the impending loss of tens of thousands of jobs. The Fed is now pushing up interest rates at the cost of US labor markets to tackle the result of Democratic overspending policies — evidence that Biden's tenure is an abject failure.
- Democratic narrative, as provided by CBS. Economic decline and a looming recession aren't specific to the US; they're hitting nations across the globe as a result of geopolitical instability caused by the war in Ukraine and the ongoing recovery from the pandemic. The Fed's aggressive response to inflation is adding to global pressures, but central banks — and politicians — have been put in an impossible position. A single political party cannot be held responsible for this situation.