IMF warns of slow growth, rising market risks during finance executives meeting

 IMF warns of slow growth, rising market risks during finance executives meeting

WASHINGTON, Oct 11 (Reuters) - The International Monetary Fund warned on Tuesday that pressure from inflation, war-induced energy and food crises and increasingly high interest rates are pushing the world to the brink of recession and financial market stability. putting them in danger.

In disappointing reports released at the start of the annual meetings of the International Monetary Fund and the World Bank in person for the first time in three years, the IMF called for monetary tightening from central banks and the U.S. The dollar has hit two-decade highs, two of the main drivers of recent volatility in financial markets.

Further lowering its 2023 global growth forecasts, the IMF said in its World Economic Outlook that countries representing a third of the world's output could be in recession next year.

"The three largest economies, the United States, China and the euro area, will continue to stall," IMF chief economist Pierre-Olivier Gourinches said in a statement. "In short, the worst is yet to come, and for many, 2023 will feel like a recession."

Some major European economies will fall into a "technological recession" next year, including Germany and Italy, as energy prices rise and slam production. The IMF said China's growth outlook was also downgraded as it struggles with continued COVID-19 lockdowns and a weak asset sector, where growth will be slowed by a deep recession.

In its Global Financial Stability Report, the IMF said rising economic pressures, coupled with tight liquidity, stubborn inflation and lingering financial vulnerabilities, are adding to the risk of disorderly asset revaluation and financial market risks.

"It's hard to think of a time where the uncertainty was so high," Tobias Adrian, the IMF's director of monetary and capital markets, told Reuters in an interview. "We have to go back decades to see so much conflict in the world, and at the same time inflation is so high."

A man walks behind the logo of the International Monetary Fund (IMF) at its headquarters in Washington, U.S., May 10, 2018. Reuters / Yuri Gripas

Finance officials from 190 IMF member states are grappling with these uncertainties from varying economic conditions in Washington this week, as well as other global challenges including a war-induced food and energy crisis in Ukraine and massive clean energy financing needs. are doing.

Priority: Inflation

The IMF said central bankers had a delicate balancing act to fight inflation without over-tightening, which could push the global economy into an "unnecessarily severe recession" and inflict economic pain on emerging markets, Those who are watching their currencies fall sharply against the dollar.

But Gourinchas said controlling inflation is a big priority and dropping it too soon will undermine the "hard-won credibility" of central banks.