IMF slashes global GDP forecast as economic outlook grows ‘gloomy and more uncertain’

The world's economic outlook isgloomy and more uncertain according to the International Monetary Fund.

The world economy is expected to grow 3.2% this year, before slowing to a 2.9% GDP rate in three years, according to the International Monetary Fund. The April projections were revised down by 0.7 and 0.4 percentage points.

The institute said that the downside risks outlined in its earlier report were now materializing. There are a number of challenges, including soaring global inflation, a worse-than- expected slowdown in China, and the aftermath of the war in Ukraine.

The report said that there was a tentative recovery in 2021.

Higher-than- expected inflation worldwide, especially in the United States and major European economies, triggering tighter financial conditions, is one of several shocks that have hit a world economy weakened by the Pandemic.

It would be the first quarterly contraction of global GDP since 2020. According to the International Monetary Fund, a less likely alternative scenario could see global growth fall to 2% in 2022, and 2% in the following year.

The World Bank slashed its global growth outlook last month due to macroeconomic pressures.

Worsening growth prospects in the U.S., China and India caused the International Monetary Fund to revise downwards.

The GDP outlook was lowered due to weaker-than- expected growth in the first half of the year and tighter monetary policy.

China's economy was seen growing 1.1 percentage points short of previous estimates. The world's second-largest economy is expected to grow 3.3% in 2022, its lowest clip in four decades.

The IMF lowered its global growth outlook in July on the back of soaring global inflation, a worse-than-expected slowdown in China and the ongoing fallout from the war in Ukraine, which is fueling a food and energy crisis.

Less favorable external conditions and more rapid policy tightening led to a 0.8 percentage point cut to India's forecast.

The euro zone's outlook was lowered by 0.2 percentage points to 2.6%, as the International Monetary Fund predicted that the war in Ukraine would have a bigger impact on Germany, France and Spain.

Russia's economy contracted less than expected in the second quarter despite wide-reaching economic sanctions, the International Monetary Fund said. The projection was revised up 2.5 percentage points.

Food and energy prices are leading to higher inflation.

Global inflation is expected to hit 6.6% in advanced economies and 9.5% in emerging market and developing economies this year, an upward revision of 0.9 and 0.8 percentage points.

Lowering inflation is the number one priority according to the International Monetary Fund.

It saidTighter monetary policy will inevitably have economic costs, but delay will only make them worse.

Policies to address higher energy and fuel prices should focus on the most vulnerable.

tighter monetary policy has been adopted by the central banks. The European Central Bank raised interest rates for the first time in more than a decade.

Inflation hit 40-year highs in the US and the UK last month.