MNI: 'Worst Is Yet To Come,' 2023 Like Recession For Many-IMF

The global economy will feel like a recession in many nations next year as growth slows and inflation remains elevated, with central banks required to raise interest rates while governments must largely stand back to avoid adding to price pressures, the IMF said Tuesday.

The global GDP forecast for next year was also reduced 0.2pp to 2.7%, slower than this year's 3.2%.Euro area growth next year was chopped 0.7pp to 0.5% amid the Ukraine war. The IMF reiterated that Federal Reserve rate hikes will slow U.S. growth to 1% next year, tightening that also boosts the risks of instability in emerging nations and financial markets.

"Downside risks to the outlook remain elevated, while policy trade-offs to address the cost-of-living crisis have become acutely challenging," the IMF said. "The risk of monetary, fiscal, or financial policy mis-calibration has risen sharply."

Central banks nonetheless must make taming inflation the top priority, the fund's outlook report said. "Raise real policy rates above their neutral level fast enough and for long enough to keep inflation and inflation expectations under control," the IMF said. "Fiscal policy also needs to support monetary policy in softening demand in economies with excess aggregate demand and overheating labor markets."