The International Monetary Fund warned that lurking financial system vulnerabilities could erupt into a new crisis and slam global growth this year, but urged member countries to keep tightening monetary policy to fight persistently high inflation.
Economic Outlook forecast real GDP growth of 2.8 percent in 2023 and 3 percent in 2024 – one-tenth of a percentage point lower than what it predicted in January for each year. The global economy grew 3.4 percent in 2022.
The downgrades reflected weaker performances in some larger economies, such as Japan, Germany, India and Brazil, offsetting a stronger performance in the United States and a shallower contraction in Britain. TheBut its forecast was dominated by downside risks, including even higher inflation, an escalation of the war in Ukraine and a severe adverse scenario of a new financial crisis that could prompt sharp pull-backs in lending and household spending and a rush into safe-haven assets.
Such risks had increased rapidly in the wake of last month’s turmoil in the global financial system, with investors remaining on edge and some looking for the next weakest link that could spread contagion,s have a lot of capital and liquidity, there could be these weak institutions that then spill back into the system as a whole,” Tobias Adrian, the director of theDespite the warnings, the‘s chief economist, Pierre-Olivier Gourinchas, said inflation is still the bigger problem and that price...
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