IMF to cut 2022 growth forecast as recession looms for weaker economies

The International Monetary Fund (IMF) is set to cut its global growth forecast for 2022 as a result of the ongoing Ukraine crisis and sees recession risks in a growing number of countries, Managing Director Kristalina Georgieva.

The IMF plans to update its projections on April 18-24 when the fund holds its annual spring meetings with the World Bank in Washington.  

On Tuesday, Georgieva told a Foreign Policy magazine broadcast forum that the Fund will lower its growth outlook when it releases new forecasts in April. The IMF last forecast 4.4% global growth for 2022 in January, down about a half percentage point from October forecasts, due to ongoing supply disruptions.

However, the world economy will manage to stay in positive territory and is still set to expand in 2022, she noted.

"Some economies that have been fast to recover from Covid are in a stronger position" to cope with the reverberations from Russia's invasion of Ukraine, Georgieva said. The US, in particular, has "fairly strong fundamentals," she said. "But those that were not yet coming out of the Covid crisis, that were falling further behind, they're going to be hit even harder," with the "possible risk of recessions."

But shocks from higher energy and food prices caused by the conflict and punishing sanctions against Russia for its invasion of Ukraine will hit many developing countries hard, she said, along with tighter financial conditions as advanced countries raise interest rates.

"What we were striving for is for growth to go up and the inflation that has become a problem to go down," Georgieva said. "Instead, we have the exact opposite. Growth is going down, inflation is going up."

Tighter financial conditions, as the Federal Reserve and other developed-world central banks raise interest rates, will be a "big shock" for many countries, according to Georgieva. About 60% of low-income countries are in "debt distress' or close to it, double the number that the IMF was worried about back in 2015, she said.

Georgieva's top deputy, Gita Gopinath, said in the same event that the IMF sees "increasing fragmentation" in global payments systems as one consequence of the war.

Georgieva and IMF First Deputy Managing Director Gita Gopinath also said curtailments of grain shipments from Ukraine and Russia mean higher food inflation and hunger, particularly in Africa.

Gopinath said this could result in new social tensions in Africa, the Middle East and parts of Asia.

"So this is a major concern and the longer this war lasts, the more grievous the problems become," she said, adding that the IMF stands ready to help countries with balance of payments assistance to help them import food supplies.