IMF says current growth forecasts provide buffer against recession

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IMF says current growth forecasts provide buffer against recession

Gita Gopinath, Chief Economist at the International Monetary Fund, speaks during a news conference on October 12, 2021, via a video link. PHOTO XINHUA DAVOS, Switzerland -- While the world economy is facing headwinds, current growth forecasts provide a buffer against a potential global recession, according to the International Monetary Fund's No. 2 official said Monday.

The conflict in Ukraine could escalate, and IMF First Deputy Managing Director Gita Gopinath told the World Economic Forum in a Swiss resort of Davos that the other challenges included inflation and a tightening of interest rates, among the major threats to economic growth.

Gopinath said that all of these risks pose downside risks to our forecast, with reference to the IMF's 2022 growth forecast last month of 3.6 percent, a downgrade from a 4.4 percent estimate in January.

She said that there is a buffer at 3.6 percent, and that risks are uneven around the world.

ALSO READ: IMF urges Asia to be mindful of spillover risks from tightening.

Gopinath said that inflation will remain above central bank targets and that it is very important for central bankers to deal with inflation as a clear and present danger. Financial conditions could tighten much more quickly than we've seen, she added.

The US Federal ReserveFederal Reserve is leading the charge among the largest central banks, with two rate hikes this year.

Its second, at half a percentage point, was the largest in 22 years. At least two more of that size are expected to be seen at coming meetings.

It is important for the Fed to watch the data carefully and respond at a scale that's needed to deal with the incoming data, Gopinath said.

READ MORE: IMF warns of'stagflationary' risks in Asia, cuts growth figures.

If inflation is particularly broad and going up even more, they may need to react more strongly.