Based on its new estimates, the global banking trade group said recession risk has increased as real growth is expected to stall.
“The weakness is widespread and leaves little room for error,” IIF economists wrote in a report. “The risk of a global recession is high. In this context, we expect non-resident flows to emerging markets to slow significantly.”
The IIF cut its global GDP growth forecast to 2.3% from 4.6%, with the G3 – the US, the euro zone and Japan – growing at a 1.9% pace this year. They expect China’s growth to slow to 3.5% from 5.1% in the previous estimate.
“Omicron’s wave in China is more disruptive than we had anticipated and will take a substantial toll on growth and capital flows”said the IIF.
Growth in the euro zone was previously cut to 1% from 3%, mainly due to the effects of the invasion of Ukraine. “It is important that, since the statistical carryover from 2021 to this year is 1.9 percentage points, this is a recession forecast that anticipates a drop in GDP in the second half of the year.”
Growth in Latin America is forecast slightly faster at 2%, thanks to high commodity prices, while the IIF expects “some degree of resilience” from Middle Eastern and North American oil exporters. Africa.
Food shortages are a risk
Export bans on agricultural products in Russia and India, as well as the expected halt to planting and harvesting in Ukraine, were cited as the IIF warned that there was a widespread risk of global food insecurity, with the Middle East and Africa probably the most affected.
