The International Monetary Fund has warned that the global economy is entering a “perilous phase” of low economic growth and high financial risk.
The International Monetary institution (IMF), which is having its spring meetings this week in Washington, reduced its estimate for global growth and claimed that its medium-term forecast for economic output was already at the poorest level since the institution started releasing these forecasts in 1990.
However, Pierre-Olivier Gourinchas, the company’s chief economist, added that there were also potentially more serious hazards.
He said, “We are… entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”
“Below the surface,” he added, “turbulence is building, and the situation is quite fragile, as the recent bout of banking instability reminded us.”
According to the fund, there is now a one in four possibility that this year’s global GDP would dip below 2%, which would be equivalent to a global recession and has only occurred five times since 1970 (most recently in 2009 and 2020).
Although the UK’s economic growth projections for this year and next have been upgraded, it is still anticipated that the country’s economy would do the poorest in the G7 this year, contracting by 0.3%.
The UK’s gross domestic product is expected to increase to 1% in 2024.
The warnings from the fund come in the wake of the failures of Silicon Valley Bank in the US and Credit Suisse in Europe, events that have prompted concerns about potential future financial instability as the market adjusts to higher interest rates.