The International Monetary Fund on Tuesday maintained its global growth forecast for this year at 3.2 percent, but lowered the outlook for next year to 2.7 percent, down 0.2 percentage point from its earlier projection, amid high inflation and monetary policy tightening.

Japan's growth projection for 2022 was left unchanged at 1.7 percent from the July projection and that for 2023 was downgraded by 0.1 point to 1.6 percent, with the IMF citing rising energy import prices and lower consumption as inflation outpaces wage growth.

With Russia's invasion of Ukraine continuing to affect the global economy, including through higher food and energy prices, and the coronavirus pandemic lingering, the IMF said in its World Economic Outlook report, "In short, the worst is yet to come, and for many people, 2023 will feel like a recession."

Countries accounting for about one-third of the global economy are poised to contract this year or next, while the United States, China and the euro area will continue to stall, the Washington-based institution said.

The IMF also pointed out that the sharp appreciation of the U.S. dollar against other currencies, on the back of the Federal Reserve's interest rate hikes that began earlier this year, is causing "acute challenges" for many emerging markets as a result of tightened financial conditions and an increase in the cost of imported goods.

The strength of the dollar has also created headaches for advanced countries such as resource-scarce Japan, which relies heavily on imports of energy and other materials. In September, Japanese authorities intervened in the foreign exchange market by buying the yen, the first such intervention in 24 years.

Noting that the dollar's current surge comes from "fundamental forces," such as the U.S. central bank's aggressive rate hikes compared to other countries, IMF chief economist Pierre-Olivier Gourinchas called on countries to "adapt" to the situation through domestic policies rather than try to stem the dollar's appreciation.

At the same time, he said currency market interventions can be justified under certain conditions in the case of financial market disturbances and other events, with the aim to limit the volatility of the currency.

"In many countries, we're not there yet," he told a press conference.

Calling the increasing price pressures "the most immediate threat to current and future prosperity," the IMF report predicted global inflation will peak at 9.5 percent in late 2022 but remain elevated for longer than previously expected, decreasing to 4.1 percent by 2024.

In the United States, growth for this year is expected at 1.6 percent, down 0.7 point from the earlier estimate while the forecast for next year remained unchanged at 1.0 percent, as inflation reduces disposable income and consumer demand. Higher interest rates are taking a toll on spending, especially on residential investment, the report said.

The euro area, hit by a reduction of gas supplies from Russia amid the war on Ukraine, is expected to see its economy grow 3.1 percent in 2022 and 0.5 percent in 2023 -- an upward revision of 0.5 point and a downward revision of 0.7 point, respectively.

China has been overshadowed by continued lockdowns under its stringent "zero-COVID" policy and weakening property sector, leading the IMF to cut the growth forecast of the world's second-largest economy by 0.1 point in 2022 and 0.2 point in 2023 to 3.2 percent and 4.4 percent, respectively.

Global trade growth is slowing sharply from 10.1 percent in 2021 -- when the world economy grew 6.0 percent amid a recovery from the downturn caused by the coronavirus pandemic -- to a projected 4.3 percent in 2022 and 2.5 percent in 2023.

The slowdown can be partly attributed to the dollar's appreciation, given the currency's dominant role in trade invoicing, the IMF said.

As the global economy is headed for "stormy waters," financial turmoil may well erupt, prompting investors to turn to safe-haven investments, such as U.S. Treasurys, and pushing the dollar even higher, the global lender warned.

Divergences in economic policies between the United States and countries such as Japan, which has maintained monetary easing, may continue to contribute to the dollar's strength, the IMF also said.

In 2022, the dollar has already appreciated by about 15 percent against the euro, over 10 percent against the Chinese yuan and 25 percent against the yen, according to the report.

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