The International Monetary Fund (IMF) has urged the Bank of Ghana (BoG) and other central banks across the world to stick to their monetary plans to tame inflation while predicting a recession in the coming quarter.
The IMF is predicting slow growth in 2023 and is warning that the strain on emerging economies due to the strength of the dollar will worsen.
“Target domestic policies to strengthen your currency,” chief economist Pierre-Olivier Gourinchas said at a press conference on the sidelines of the IMF/World Bank annual meetings to highlight the world economic outlook.
The Fund is recommending that fiscal policy should not work at cross-purpose with monetary authorities’ efforts to bring down inflation explaining that doing so will only prolong inflation and could cause serious financial instability, as recent events illustrate.
The IMF is projecting that global growth will fall by -0.2% from 3.2% to 2. 7%.
“We estimate that there is about a one in a four probability that global growth next year could fall below the historical level of 2%,” Gourinchas said.
About one-third of the world economy is expected to contract this year or next. The slowdown will be most pronounced in the Euro area while in the Sub-Saharan region a rebound, but also at a very slow pace. The energy crises caused by the Russian-Ukraine war will continue to take a toll on every country.
The Fund said the 2023 slowdown will be broad-based, with countries accounting for about one-third of the global economy including the US, and China is poised to contract this year or next.
“Overall, this year’s shocks will re-open economic wounds that were only partially healed post-pandemic. In short, the worst is yet to come,” warned Gourinchas.
Despite the economic slowdown, global inflation is now expected to peak at 9.5% this year before decelerating to 4.1% by 2024.
Nana Oye Ankrah
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