IMF chief warns of global recession

“It is going to be a tough ’22, but maybe even a tougher ’23,” IMF Managing Director Kristalina Georgieva warned, adding “recession cannot be ruled out”. Despite the ubiquitous signs of recession, the Fed warned of taking yet another big step this month.

In an interview with Reuters on Wednesday (local time), the IMF chief said the fund would be releasing a new estimate that lowers the expected growth rate of the world economy. Also in April, the IMF lowered the projection of economic growth rate from 4.4 percent in January to 3.6 percent.

Georgieva warned that the business conditions have darkened significantly, citing the inflation triggered from April, a spike in interest rates, the slowing Chinese economy, and the Western sanctions on Russia as reasons for lowering the economic outlook. If recession becomes reality, the global economy will face the first double dip (a period of economic decline is followed by a brief period of growth, followed by a further period of decline) in about 40 years since the early 1980s.

On the other hand, the Fed announced that it will take a restrictive policy to tame inflation at the cost of economic slowdown. According to the minutes of the Federal Open Market Committee from June 14 and 15, which was disclosed on Wednesday, most attendees believed it to be appropriate to raise the base rate by 0.5 to 0.75 percentage points at the end of this month. The Fed made clear that it will press ahead with stabilizing the prices, with the expression‎ of “inflation” repeated over 90 times in the minutes.


Hyoun-Soo Kim kimhs@donga.com