Head of the International Monetary Fund Kristalina Georgieva said it will downgrade its expectations for global economic growth this month. Its most recent forecast, issued in April, was for 3.6% growth this year and next.
Kristalina Georgieva said the crisis in Ukraine, higher than expected inflation, and the ongoing Covid pandemic are to blame. These are making the cost of living crisis worse for millions, she said. And the poorest are suffering the most, she added.
It comes as inflation in the US - world's biggest economy - reached 9.1%, the highest in more than 40 years.
Her warning that the global economic outlook "has darkened significantly" comes as G20 finance ministers and central bank governors prepare to meet in Bali.
Georgieva said in a blog post that inflation has "broadened beyond food and energy prices" in that has led many central banks to increase the cost of borrowing, something she said will "need to continue".
The IMF says 75 central banks have raised interest rates in the last year, on average, 3.8 times. But if that pattern doesn't continue Georgieva anticipates "even more harm to growth and employment", adding: "Acting now will hurt less than acting later."
There is also a warning that countries who have pumped in billions of dollars to support their economies through the pandemic need to reduce that to dampen the demand for goods and services that is being fuelled by that money. However, cash handouts "to support vulnerable households", are still needed, especially those who are suffering most from high energy or food prices, she said.
Georgieva said this spending must be funded by cuts elsewhere or new sources of income, other than debt. In the longer term, policies that tackle the global shortage of labour, especially those that encourage more women to work, will help too, she adds.
With preparations underway for this weekend's G20 meeting, Georgieva says that better global cooperation is needed because "risks of social instability are rising" thanks to concerns over food and energy supplies.
Such concerns have contributed to the widespread protests in Sri Lanka, which is suffering it's worst economic crisis since independence more than 70 years ago.
She also called for the world's richest countries to use the meeting as a chance to help "provide urgent support" to those most in need.
