The International Monetary Fund (IMF) has lowered its outlook for global economic growth to 2.8% from 2.9% previously.
The Washington, D.C.-based financial agency of the United Nations said its view of the global economy has dimmed slightly due to persistent inflation, continued interest rate hikes, and a recent crisis among U.S. and European banks.
The IMF added that the potential for a “hard landing,” in which rising interest rates lead to a global recession has “risen sharply” in recent months among the world's wealthiest countries.
The international financial institution also forecast 7% worldwide inflation this year, up from its previous forecast of 6.6%.
Stubbornly high inflation is expected to force the U.S. Federal Reserve and other central banks to continue lifting interest rates and keep them at or near peak levels longer to help lower consumer prices.
The IMF now forecasts a 25% likelihood that global economic growth will fall below 2% this year. That has happened only five times since 1970, most recently when COVID-19 slammed the breaks on the global economy in 2020.
The agency said it now expects the U.S., the world’s largest economy, to grow 1.6% this year, up from 1.4% it had predicted in January of this year.
In Europe, the IMF forecasts lacklustre growth of 0.8%, up slightly from its previous forecast. China’s economy is expected to grow 5.2% this year, unchanged from an earlier forecast.
