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The International Monetary Fund (IMF) has warned that the global economy faces an increased risk of recession in 2024. In its latest World Economic Outlook report, the IMF downgraded its global growth forecast for 2024 to 2.9%, down from 3% in its previous forecast.
The IMF cited a number of factors that are contributing to the increased risk of recession, including the ongoing war in Ukraine, persistent inflation, and the tightening of monetary policy by central banks around the world.
War in Ukraine
The war in Ukraine has disrupted global supply chains and sent energy prices soaring. The conflict has also raised concerns about a wider escalation of tensions between Russia and the West, which could further destabilize the global economy.
Inflation has been rising rapidly in many countries around the world, driven by a number of factors, including the war in Ukraine, supply chain disruptions, and strong consumer demand. High inflation is eroding consumer purchasing power and weighing on business investment.
Monetary Policy Tightening
Central banks around the world are raising interest rates in an effort to combat inflation. The Federal Reserve has already raised interest rates five times this year, and it is expected to continue raising rates in the coming months. Other central banks, including the European Central Bank and the Bank of England, are also expected to raise interest rates.
Impact on Advanced Economies
The IMF’s warning comes as advanced economies are facing a number of headwinds, including slowing growth, rising inflation, and the tightening of monetary policy. The risk of recession is particularly high in Europe, where growth is expected to slow to 0.5% in 2024, down from 1.2% in 2023.
Impact on Emerging and Developing Economies
Emerging and developing economies are also facing challenges, but they are expected to fare better than advanced economies overall. Growth in emerging and developing economies is forecast to slow to 4.3% in 2024, down from 4.9% in 2023.
The IMF’s warning does not mean that a recession is inevitable. However, it does highlight the significant risks that the global economy faces. If the war in Ukraine continues, inflation remains high, and monetary policy tightening is too aggressive, then a recession could occur.
Policymakers need to take careful action to address the risks to the global economy. This includes providing support to vulnerable households and businesses, ensuring that financial markets remain stable, and communicating clearly about their policy plans.
The global economy is facing a number of challenges, and the risk of recession is increasing. Policymakers need to take careful action to address these risks and ensure that the global economy remains on a sustainable path.
Countries list from top to last:
- United States
- South Korea
- United Kingdom