The International Monetary Fund warned it will again cut the forecast for global economic growth as impacts reverberate from Russia’s invasion of Ukraine, pandemic-related shutdowns in China and higher inflation. 

The outlook for this year and next will be downgraded later this month when the IMF releases its World Economic Outlook Update, Managing Director Kristalina Georgieva wrote in a blog post published Wednesday, without providing specific figures

The commodity price shock from the war in Ukraine had exacerbated the cost-of-living crisis for hundreds of millions of people, Kristalina Georgieva said and it was “only getting worse”.

Inflation was also higher than expected, she said in a blogpost that came on the same day as the latest figures showed that prices in the US rose at a 40-year high of 9.1 per cent in June.

Economists and investors now think the US Federal Reserve could hike interest rates by a historic 1 per cent when its board meets in two weeks’ time, The Guardian reported.

“Indeed, the outlook remains extremely uncertain. Think of how further disruption in the natural gas supply to Europe could plunge many economies into recession and trigger a global energy crisis. This is just one of the factors that could worsen an already difficult situation,” said Georgieva.

She also said as an immediate step, countries must reverse recently imposed restrictions on food exports
as such restrictions are harmful and ineffective in stabilising domestic prices.

She called for further measures to strengthen supply chains and to help vulnerable countries adapt food production to cope with climate change. Calling for a fresh impetus for global cooperation led by the G20, the IMF MD said to avoid potential crises and boost growth and productivity, more coordinated international action is urgently needed.

Economists surveyed by Bloomberg predict growth of 4.1% in China this year and a possible contraction in quarter-on-quarter GDP in the April-June period. That makes it unlikely the government will meet its full-year target of around 5.5%.   

Her warning that the global economic outlook “has darkened significantly” comes as G20 finance ministers and central bank governors prepare to meet in Bali.

Their agenda is full of issues that are troubling the global economy, including rising commodity prices, food security, and the impact of the war in Ukraine given it was a major food exporter.

Indonesia’s central bank governor Perry Warjiyo is cautious about the prospect of reaching an agreement over the way forward, saying: “We hope for the best, but of course prepare for the worst”.

Ms Georgieva said in a blog post that inflation has “broadened beyond food and energy prices” in that has led many central banks to increase the cost of borrowing, something she said will “need to continue”. 

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