I.M.F. head warns risks of recession are on the rise: 'Likely to get worse than to get better'

Estimates "one-third of the world economy" will face contractions in near future.

Updated: October 6, 2022 - 11:13am

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The head of the International Monetary Fund on Thursday warned of potential economic calamity in the near future, stating that the risks of recession are rising and that the organization is downgrading its short-term global economic outlooks. 

Kristalina Georgieva said at Georgetown on Thursday morning that world leaders are facing an "urgency to stabilize the economy, given the darkening global outlook." 

"Last October, we projected a strong recovery from the depths of the Covid crisis," she said, noting that "global growth reached 6.1 percent in 2021." Yet "multiple shocks, among them a senseless war, changed the economic picture completely."

"We have downgraded our growth projections already three times, to only 3.2 percent for 2022 and 2.9 percent for 2023," Georgieva said, adding that the I.M.F. plans to "downgrade growth for next year."

"We will flag that the risks of recession are rising," she continued. "We estimate that countries accounting for about one-third of the world economy will experience at least two consecutive quarters of contraction this or next year. And, even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices."

The leader urged regulators to "stay the course" in tamping down inflation as well as "put in place responsible fiscal policy."

"Given the gravity of the cost-of-living crisis, governments should deploy fiscal measures that are not only temporary, but also targeted" toward lower-income households, she said.