The International Monetary Fund (IMF) is predicting an increasingly gloomy global economic outlook for the coming years, projecting a $4 trillion loss in global output from now to 2026.
Kristalina Georgieva, the managing director of the IMF, said in remarks at Georgetown University on Thursday that the world is seeing a “fundamental shift” in the global economy from relative predictability to greater uncertainty.
She said the IMF predicted a strong economic recovery from the COVID-19 pandemic as global growth reached 6.1 percent in 2021. Most economists thought the recovery would continue and inflation would subside with vaccine access helping restore supply chains, but multiple economic shocks have changed the outlook, she said.
“Multiple shocks, among them a senseless war, changed the economic picture completely,” she said, referencing Russia’s invasion of Ukraine. “Far from being transitory, inflation has become more persistent.”
Georgieva said all the world’s largest economies are slowing down, with Europe severely impacted by Russia cutting off its access to natural gas, China still struggling with pandemic-related disruptions and inflation in the United States reducing disposable income and consumer demand.
She said the slowdown is having an adverse effect on developing countries that are seeing reduced demand for exports and may be strained by high food and energy prices.
She said the IMF will downgrade its global growth projection in its World Economic Outlook next week.
Georgieva’s comments come as Treasury Secretary Janet Yellen is set to speak at the Center for Global Development on Thursday about the challenges facing the global economy and the role of multilateral development banks.
Georgieva said the $4 trillion loss expected through 2026 is equivalent to the size of the German economy, which she said is a “massive setback.”
The risks of recession are rising, and countries accounting for one-third of the global economy will experience at least two consecutive quarters of contraction this year or next year, the technical definition of a recession, she said.
She added people will feel like they are in a recession even when growth is positive because of declining real incomes and rising prices.
Georgieva said the IMF’s three priorities are to stay on track to reduce inflation, put in place responsible fiscal policy to protect economically vulnerable individuals and countries without fueling inflation, and support emerging markets and developing economies.