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Global economy will falter in 2023 if inflation doesn’t come under control: IMF

  • This year’s global economic outlook has been “gloomy” but 2023 will be even worse if inflation fails to get under control.
  • IMF chief Kristalina Georgieva said the global economy will still recover from one shock after another over the next year.
  • Central banks will have no choice but to hike rates as inflation is the “biggest enemy,” she said.

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The outlook for this year’s global economy is “bleak,” but conditions could get even tougher in 2023 if central banks fail to get inflation under control, according to International Monetary Fund chief Kristalina Georgieva.

“This year is tough, next year even tougher,” Georgieva warned in an interview with CNN on Thursday, citing ongoing supply chain issues from the pandemic and Russia’s invasion of Ukraine that have pushed up both food and energy prices year on atmospheric values.

But the chances of a full economic recovery next year are slim, she said, as the economy is still being riddled with “shock after shock after shock”. With new variants, the COVID-19 pandemic drags on, and other experts don’t think Russia will end its invasion of Ukraine any time soon.

That spells trouble for the global economy, Georgieva said, calling the painful spiral in food and energy prices around the world a “cost-of-living crisis.”

In Europe in particular, energy prices have skyrocketed after being cut off from Russian gas supplies, with electricity prices rising by over 1,400% in the last year.

Inflation also continues to plague the US economy, with the August CPI coming in at 8.3%, beating expectations. That’s a continuation of the recent downtrend, but still well above the Fed’s long-term target of 2%, prompting the central bank to hike rates another 75 basis points on Wednesday.

Other central banks around the world would have “no choice” but to follow suit, said Georgieva, who today described inflation as the world economy’s “biggest enemy”.

“The critical issue before us is the restoration of growth conditions, and price stability is a critical condition,” Georgieva said.

She added that it would have an undue impact on the poorest sections of the population and runaway inflation would only result in “more people on the streets”.

“If we don’t bring inflation down, it will hurt the most vulnerable,” she warned.

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