World economy has buffer against recession: International Monetary Fund

Davos (Switzerland), May 24

While the world economy faces headwinds, current growth forecasts offer a buffer against a potential global recession, the International Monetary Fund’s No. 2 official said on Monday.

Among the major threats to economic growth, IMF First Deputy MD Gita Gopinath said the conflict in Ukraine could escalate, adding: “You could have sanctions and counter sanctions”.

Deal with inflation in forceful manner

Inflation will remain significantly above central bank targets for a while. It is very important for central bankers around the world to deal with inflation as a clear and present danger that is something they need to deal with in a very forceful manner. Gita Gopinath, first Deputy Managing Director, International Monetary Fund

Gopinath said in an interview on the sidelines of the World Economic Forum in Davos that the other challenges included inflation, tightening of interest rates by central banks and a slowdown in Chinese growth.

“So all of these provide downside risks to our forecast,” Gopinath said with reference to the IMF’s 2022 growth forecast issued last month of 3.6%, a downgrade from a 4.4% estimate in January.

“I would say at 3.6% there is a buffer,” she said. “There are countries that are getting hit hard ... countries in Europe that are getting hit hard by the war, where we could see technical recessions,” Gopinath added. — Reuters