IMF Cuts Global Growth Outlook, Warns High Inflation Threatens Recession

Customers dine at a restaurant in a shopping area in Beijing, China July 25, 2022. (Reuters)
Customers dine at a restaurant in a shopping area in Beijing, China July 25, 2022. (Reuters)
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IMF Cuts Global Growth Outlook, Warns High Inflation Threatens Recession

Customers dine at a restaurant in a shopping area in Beijing, China July 25, 2022. (Reuters)
Customers dine at a restaurant in a shopping area in Beijing, China July 25, 2022. (Reuters)

The International Monetary Fund cut global growth forecasts again on Tuesday, warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.

Global real GDP growth will slow to 3.2% in 2022 from a forecast of 3.6% issued in April, the IMF said in an update of its World Economic Outlook. It added that world GDP actually contracted in the second quarter due to downturns in China and Russia.

The fund cut its 2023 growth forecast to 2.9% from the April estimate of 3.6%, citing the impact of tighter monetary policy.

World growth had rebounded in 2021 to 6.1% after the COVID-19 pandemic crushed global output in 2020 with a 3.1% contraction.

"The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one," IMF Chief Economist Pierre-Olivier Gourinchas told a news conference.

"The world's three largest economies, the United States, China and the euro area, are stalling, with important consequences for the global outlook," he added.

‘Plausible’ Russian gas embargo

The fund said its latest forecasts were "extraordinarily uncertain" and subject to downside risks from Russia's war in Ukraine pushing energy and food prices higher. This would exacerbate inflation and embed longer-term inflationary expectations that would prompt further monetary policy tightening.

Under a "plausible" alternative scenario that includes a complete cut-off of Russian gas supplies to Europe by year-end and a further 30% drop in Russian oil exports, the IMF said global growth would slow to 2.6% in 2022 and 2% in 2023, with growth virtually zero in Europe and the United States next year.

Global growth has fallen below 2% only five times since 1970, Gourinchas said - recessions in 1973, 1981 and 1982, 2009 and the 2020 COVID-19 pandemic.

The IMF said it now expects the 2022 inflation rate in advanced economies to reach 6.6%, up from 5.7% in the April forecasts, adding that it would remain elevated for longer than previously anticipated. Inflation in emerging markets and developing countries is now expected to reach 9.5% in 2022, up from 8.7% in April.

"Inflation at current levels represents a clear risk for current and future macroeconomic stability and bringing it back to central bank targets should be the top priority for policymakers," Gourinchas said.

An unprecedented synchronized global monetary policy tightening by central banks will "bite" next year, slowing growth and pressuring emerging market countries, but delaying this process "will only exacerbate the hardship," he said, adding that central banks "should stay the course until inflation is tamed."

US, China downgrades

For the United States, the IMF confirmed its July 12 forecasts of 2.3% growth in 2022 and an anemic 1.0% for 2023, which it previously cut twice since April on slowing demand.

The Fund deeply cut China's 2022 GDP growth forecast to 3.3% from 4.4% in April, citing COVID-19 outbreaks and widespread lockdowns in major cities that have curtailed production and worsened global supply chain disruptions.

The IMF also said the worsening crisis in China's property sector was dragging down sales and investment in real estate. It said additional fiscal support from Beijing could improve the growth outlook, but a sustained slowdown in China driven by larger-scale virus outbreaks and lockdowns would have strong spillovers.

The IMF cut its eurozone growth outlook for 2022 to 2.6% from 2.8% in April, reflecting inflationary spillovers from the war in Ukraine. But forecasts were cut more deeply for some countries with more exposure to the war, including Germany, which saw its 2022 growth outlook cut to 1.2% from 2.1% in April.

Italy, meanwhile saw an upgrade in its 2022 growth outlook due to improved prospects for tourism and industrial activity. But the IMF said last week that Italy could suffer a deep recession under a Russian gas embargo.

Russia's economy is expected to contract by 6.0% in 2022 due to tightening Western financial and energy sanctions - a "fairly severe recession," Gourinchas said. But that is an improvement over the April forecast of an 8.5% contraction, due to Moscow's measures to stabilize its financial sector, which is helping to support the domestic economy.

The IMF estimates that Ukraine's economy will shrink by some 45% due to the war, but the estimate comes with extreme uncertainty.



Saudi Arabia Signs New Port Contracts Worth Over $586 Million

Acting President of Mawani Mazen Al-Turki (Asharq Al-Awsat) 
Acting President of Mawani Mazen Al-Turki (Asharq Al-Awsat) 
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Saudi Arabia Signs New Port Contracts Worth Over $586 Million

Acting President of Mawani Mazen Al-Turki (Asharq Al-Awsat) 
Acting President of Mawani Mazen Al-Turki (Asharq Al-Awsat) 

Saudi Arabia’s General Authority for Ports (Mawani) has signed a series of new build-operate-transfer (BOT) contracts worth more than SAR 2.2 billion ($586.6 million) to develop multi-purpose cargo terminals at eight of the Kingdom’s ports.

Acting President of Mawani, Mazen Al-Turki, announced the deals during a signing ceremony held on Monday, describing the move as another milestone in Saudi Arabia’s continued infrastructure development under government leadership.

These 20-year contracts are part of a strategic public-private partnership, bringing together local and international investors to enhance operational capabilities and increase the handling capacity of Saudi ports. The initiative aligns with the objectives of the National Transport and Logistics Strategy, which seeks to position the Kingdom as a global logistics hub.

Al-Turki emphasized that these new agreements build upon previous privatization deals, including the development of container terminals at Jeddah Islamic Port and King Abdulaziz Port in Dammam, with investments exceeding SAR 16 billion. The Authority has also signed agreements to develop 20 logistics zones across the country, backed by over SAR 10 billion in investments.

He added that the latest contracts reflect the significant transformation and strategic evolution of Saudi Arabia’s ports, contributing to improved international performance indicators and reinforcing the Kingdom’s role as a key player in the global maritime industry.

Minister of Transport and Logistics Services and Chairman of Mawani, Eng. Saleh Al-Jasser, noted that the growing flow of private-sector investment demonstrates the attractiveness of Saudi ports and the logistics sector. He highlighted recent advancements in operational efficiency and maritime connectivity, supported by major global and national companies.

Al-Jasser affirmed that the Kingdom’s transport ecosystem will continue expanding its partnerships with the private sector across all regions and domains, with the new contracts marking the continuation of strategic collaborations with leading global and local port operators.

Under the newly signed contracts, the Saudi Global Ports Company will develop, manage, and operate multi-purpose terminals at east coast ports, including King Abdulaziz Port in Dammam, Jubail Commercial Port, King Fahd Industrial Port in Jubail, and Ras Al Khair Port.

Meanwhile, Red Sea Gateway Terminal will handle similar operations on the west coast, covering Jeddah Islamic Port, Yanbu Commercial Port, King Fahd Industrial Port in Yanbu, and Jazan Port.

At King Fahd Industrial Port in Yanbu, the agreements include modernizing cargo handling with state-of-the-art STS and RTG cranes, reach stackers, trucks, and trailers, aimed at reducing truck turnaround times, vessel berthing durations, and boosting overall efficiency.