Crude oil prices fell on Tuesday as the International Monetary Fund warned that high inflation and the Russian-Ukraine war could send the global economy to the brink of a recession, reports Oil Price.
Tighter monetary policy
In an update to its World Economic Outlook, the IMF also slashed global GDP growth forecasts for this year, to 3.2%, as GDP already contracted in Q2. The new estimate is down from its forecast of 3.6% made in April.
The IMF’s view of 2023 on the back of tighter monetary policy was also downgraded to 2.9%–down from its estimate of 3.6% made in April.
“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,” the IMF Chief Economist Pierre-Olivier Gourinchas said at a Tuesday news conference, according to Reuters.
Uncertain forecasts
The IMF cautioned that its forecasts were “extraordinarily uncertain” with even more downside risks possible courtesy of higher energy and food prices as a result of the war in Ukraine—a recipe that could worsen inflation and trigger even more monetary policy tightening.
In a worse-case—yet “plausible” scenario, Russia could halt gas flows to Europe completely by year end, along with another 30% drop in Russian oil exports, slowing GDP growth even further to 2.6% this year and 2% nextc year.
For 2022 inflation in advanced economies, the IMF sees it reaching 6.6%–up from 5.7% that it predicted in its April forecast.
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Source: Oil Price
