IMF Forewarns of Impending Recession Even as Bitcoin Dips Under $21K

Amid the recent Bitcoin price dip, the IMF (International Monetary Fund) recently released its July 2022 World Economic Outlook which hints at a recession.

According to the document, the IMF forecasts that there will be a significant slowdown in global growth. In addition, the international financial institution puts estimated growth rate figures at 3.2% in 2022 and 2.9% in 2023. Part of the IMF’s report reads:

“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.”

Furthermore, the IMF cited several causative factors as reasons for the projected slowdown in global growth. These include rising inflation in the US and Europe, as well as a worse-than-anticipated slowdown in China from Covid-related developments. The IMF also cited negative spillovers from the Russian war in Ukraine as another contributor to a looming recession.

Proffered Solutions to Macroeconomic Constraints

Proffering remedial measures, the IMF suggests that reeling in inflation should be the first order of business. Furthermore, the world-renowned financial institution also implies that the US Federal Reserve and European Central Bank are already deploying suitable measures via increasing rates. However, the IMF also admits that although this recourse might bite hard on consumerism, the alternative could be worse. As the IMF put it, “tighter monetary policy will inevitably have real economic costs, but delay will only exacerbate them.”

The IMF also addressed the inflation challenge by suggesting targeted fiscal support. According to the institution, such fiscal support will help to lessen the impact on the most vulnerable. However, the IMF also explains that other macroeconomic countermeasures must be taken to make the fiscal scheme effective. As the leading financial institution explained it:

“…with government budgets stretched by the pandemic and the need for a disinflationary overall macroeconomic policy stance, such policies will need to be offset by increased taxes or lower government spending.”

IMF Does Not Think Bitcoin Slump Is Major Risk Like Inflation, Recession

The IMF identifies inflation and a recession as major risks, but fails to put the Bitcoin price slump in that category. The institution believes the crypto sell-off will not reach the broader financial market, despite the downturn. Meanwhile, the price of BTC dropped below the $21K threshold for the first time in eight days on July 26. Furthermore, this development comes as market observers, analysts, and players brace for a Fed decision on anti-inflation policy.

BTC Bulls Remain Optimistic in Short & Long Term

Despite the perceived tense situation surrounding the markets, some optimists remain cautiously bullish on BTC. For instance, a Twitter crypto education and analysis account IncomeSharks has suggested that BTC’s price movement for the week is going according to plan. In addition, the account also specified that it now has its sights set on a higher price threshold and would hold out.

Popular Stock-to-Flow Bitcoin price model creator PlanB also sees Bitcoin price eventually going up again – albeit in the long term. According to PlanB, the prominent crypto could still hit $1 million by 2027.

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.