The International Monetary Fund on Monday expected global growth to slow to 2.9% in 2023 from 3.4% in 2022. 2.7% in October.
The IMF said the upgrade in outlook reflects China’s “sudden reopening” which is “paving the way for a rapid recovery in activity”. It cited an unexpected slowdown in many economies in the second half of 2022, as well as an improvement in global financial conditions as inflation starts to ease and the US dollar comes down from its peak.
Official data released on Tuesday showed that Europe’s economy was able to show growth in the fourth quarter of 2022. GDP growth in countries using the euro currency was 0.1% compared to the third quarter of the year, easing fears of a recession..
“The outlook is less bleak than the October forecast, and could mark a turning point, with growth bottoming out and inflation slowing,” Pierre-Olivier Gourinchas, the IMF’s research director, wrote in a blog post.
The IMF stressed that growth this year would be “weak by historical standards”. (Between 2000 and 2019, the annual average is 3.8%.)
Central banks must continue their aggressive campaign to reduce decades of high inflation, which can cause a slowdown in economic activity. It predicted that “nine out of ten advanced economies will collapse.”
In the United States, growth is expected to slow from 2% in 2022 to 1.4% in 2023. Europe – Its Economy It was surprisingly difficult The 20 countries that use the euro are forecast to see growth of between 3.5% and 0.7% – despite the region’s energy crisis – partly because of the absence of winter.
The United Kingdom A contraction of 0.6% is expected. It is the only Group of Seven economy forecast to contract this year. A closely watched survey of executives released last week showed that A sharp decline in business activity Since the national covid lockdown two years ago.
High interest rates and low consumer confidence are causing outages in the dominant service sector, while the public sector has suffered its worst wave of strikes in decades.
However, the International Monetary Fund sees some improvement at the global level Overview. A major reason is China.
Beijing ended its strict “zero Covid” policy late last year, reopening its borders and moving away from strict quarantine and testing policies. Stunned growth In the world’s second largest economy. Its 3% expansion in 2022 is one of the country’s worst performances in decades.
The IMF now predicts China’s growth will be 5.2% this year, significantly higher than its previous estimate.
Inflation trends are also promising. The IMF noted that “aggregate measures [are] Now declining in most countries,” price increases for goods and services other than food and energy have not yet peaked in many cases. Annual title A reading on US inflation hit a peak in June, while inflation in Europe has eased since October, when it hit a record.
The IMF predicts that global inflation will slow from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024. Before the pandemic, it was closer to 3.5%.
A rebound in the US dollar’s strength since November, meanwhile, has helped emerging market and developing economies. The greenback’s steep rally has made imports of goods including food and energy more expensive and raised the cost of paying interest on some debt.
Risks to the outlook remain substantial, the IMF warned. China’s recovery could lose steam if future waves of coronavirus keep people at home or the vulnerable asset sector shrinks sharply. Inflation may remain elevated for longer than central banks would like, forcing tighter monetary policy. The war in Ukraine remains a major source of uncertainty. The increase could add to disruptions in food and energy markets.
For now, the next 12 months looks a little better — While stressing that they can’t be easy.
“At this time, the global economic outlook is not deteriorating,” Gourinchas wrote. “This is good news, but not enough. The road to full recovery is just beginning, with sustainable growth, stable prices and progress for all.