The heads of the International Monetary Fund (IMF) and the World Bank warned on Monday of economic headwinds that increase the risk of a global financial downturn.
“There is a real risk and danger of a global recession next year. Advanced economies are slowing down in Europe, so we’ll see where it goes next year,” World Bank Group President David Malpass told IMF Director Kristalina Georgieva during the discussion.
“But currency depreciation means that developing country debt levels are becoming increasingly onerous,” Malpass added. “The rise in interest rates gives it added weight. And inflation remains a major problem for everyone, especially the poor.”
Georgieva pointed out that the IMF has calculated that a third of the world economy will have had at least two consecutive quarters of negative growth this year with a slowdown costing the global economy some $4 billion through 2026.
“We are seeing a slowdown in the three key economies of the world,” he said. “Eurozone, mainly because gas prices skyrocketed. China, due to COVID disruptions and housing sector volatility, we see a very significant issue in China dragging down growth,” Georgieva said.
“And in the United States the labor market is still very strong, but it’s also losing a little bit of momentum because interest rates are starting to go up.”
Malpass and Georgieva’s comments come as the Federal Reserve has been raising interest rates throughout this year in an effort to curb record inflation, raising concerns that the United States could be headed for a recession.
