US Economy to ‘Narrowly Avoid’ Recession in 2022 and 2023, IMF Says
June 24, 2022
The International Monetary Fund (IMF) further slashed its growth outlook for the U.S. but expects the economy to “narrowly avoid” a recession this year and next.
The IMF now expects U.S. GDP to grow 2.9% in 2022, down from a projection of 3.7% made in April. The group also lowered its U.S. growth forecast for 2023 to 1.7%, down from 2.3% previously, and expects growth to trough at 0.8% in 2024.
The IMF acknowledged that it will be a “tricky task” for the Federal Reserve to slow wage and price growth without tipping the economy into a recession. The group warned that “global supply constraints and domestic labor shortages are likely to persist, and the war in Ukraine creates additional uncertainties,” and warned that “there is a narrowing path to avoiding a recession in the U.S.”
The Fed’s plan of quickly getting its benchmark rate to 3.5% to 4% “should create an upfront tightening of financial conditions which will quickly bring inflation back to target,” according to IMF Managing Director Kristalina Georgieva.
Georgieva noted that though price stability was important to protect U.S. incomes and sustain growth, there may be “some pain” for consumers in achieving it.
If there ultimately is a recession, the IMF believes it would likely be relatively short.