Economic forecasts set to change as IMF warns of cost of living crisis

The International Monetary Fund (IMF) has hinted that it will change the institution’s global growth forecast following the historic inflation rate spike, induced by the war in Ukraine.

The IMF quoted Managing Director Kristalina Georgieva in a blog post on Friday, where she said the current economic downturn would weigh heavily on poor families as the crisis increases the cost of living, as governments around the world around the world are struggling with soaring inflation.

Ripples Nigeria had reported that inflation in Nigeria hit 18.60% in June, its highest level in five years. In addition, the United States had released its inflation data, which climbed to 9.1% in June, the highest level in 41 years.

In order to curb the rise, countries are raising their interest rates, which has sent the cost of borrowing to a new high in recent years. This policy is expected to increase the cost of goods and services, especially in countries like Nigeria.

Rising interest rates will reduce household spending, force businesses to suspend jobs and to some extent downsize to cut costs in the face of falling incomes and a lack of affordable loans to expand their business and meet expenses.

According to Georgieva, the ripple effect of the “human tragedy of the war in Ukraine” will trigger a cost of living crisis, negatively impacting hundreds of millions of people, as it ripples through the economy, sending shocks to the price of raw materials, and slowing down the economy.

Also Read: IMF warns Nigeria’s fiscal woes will worsen

These factors will force the IMF to revise its forecasts in a report to be released later this month, “IMF likely to revise down its global growth projections for 2022 and 2023 in outlook update global economy later this month”. , report paraphrased Georgieva.

“2022 will be a tough year, and possibly an even tougher 2023, with an increased risk of recession.” the head of the IMF was quoted.

Georgieva explained that “the human tragedy of the war in Ukraine has worsened. So does its economic impact, particularly through commodity price shocks that are slowing growth and exacerbating a cost of living crisis that is affecting hundreds of millions of people, especially the poor who do not cannot afford to feed their families.

She further said, “Inflation is higher than expected and has widened beyond food and energy prices. This prompted the major central banks to announce further monetary tightening, which is necessary but which will weigh on the recovery. Continued pandemic-related disruptions, particularly in China, and renewed bottlenecks in global supply chains have hampered economic activity.

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