IMF Downgrades US GDP Growth For 2022 To 2.9% And Warns That The Window For Avoiding A Recession Is Closing.

IMF Managing Director Kristalina Georgieva stated in an annual evaluation of US economic policy over the weekend that the US Gross Domestic Product (GDP) is now anticipated to increase by 2.9 percent in 2022, down from its most recent prediction of 3.7 percent in April.

Key Takeaways

In 2023 and 2024, the US economy will expand by 1.7 and 0.8 percent, respectively. The US economy expanded by 5.7 percent in 2021 after shrinking by -3.4 percent in 2020.

We anticipate that the US economy will decelerate in 2022–2023 but barely escape entering a recession based on the median prediction for the policy rate issued at the June FOMC (Federal Open Market Committee) meeting.

"The predicted slowdown in US demand, coupled with the necessary tightening of global financial conditions, has great potential to adversely affect individuals, firms, and governments who are leveraged in US dollars and/or that face major near-term funding needs," according to the report.

"By late 2023 or early 2024, the policy rate will need to be raised above neutral in ex-ante real terms and maintained there for a while in order to successfully lower inflation down to the Federal Reserve's target range of 2%. Given the size of the inflation issue we currently face."

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