The International Monetary Fund says the cryptocurrency crash has not destabilised the world economy.
In its 2022 World Economic Outlook, the institution – which works to foster global monetary cooperation and secure financial stability with its 190 member countries – warned that with growth stalling in the UK, US, China and Europe, the world “may soon be teetering on the edge of a global recession”.
However, it also said: “Crypto assets have experienced a dramatic sell-off that has led to large losses in crypto investment vehicles and caused the failure of algorithmic stablecoins and crypto hedge funds, but spillovers to the broader financial system have been limited so far.”
The IMF is now forecasting global growth of just 3.2% this year and 2.9% in 2023 after the global economy shrank for the first time since 2020 due to the Ukraine war and COVID-19.
The probability of a recession in the G7 economies – Canada, France, Germany, Italy, Japan, the US and UK – is 15%, four times higher than usual.
The UK is set for the slowest growth of the G7 countries in 2023, with the IMF predicting it will fall to just 0.5%. The US’ 2023 growth forecast has also been cut to 1%.
“The risk of recession is particularly prominent in 2023, when in several economies growth is expected to bottom out, household savings accumulated during the pandemic will have declined, and even small shocks could cause economies to stall,” said the IMF.
“[It will be] increasingly challenging to avoid a recession.”