The International Monetary Fund (IMF) on Tuesday slightly cut the global growth forecast to 2.8% this year and 3% in 2024 and predicts that inflation will fall more slowly than expected, warning of enormous uncertainty.
In the updated global economic forecasts, released during the spring meetings of the IMF and the World Bank, the institution led by Kristalina Georgieva points out that inflation is slowly falling, but economic growth remains historically low and financial risks have increased.
In the report, the IMF forecasts that the world economy will grow 2.8% this year and 3% in 2024, 0.1 percentage points (pp) less than in January.
On the other hand, he continues to expect global inflation to decline, but more slowly than previously forecast, from 8.7% in 2022 to 7% this year and 4.9% in 2024.
Global inflation will decline, albeit more slowly than originally forecast, from 8.7% in 2022 to 7.0% this year and 4.9% in 2024.
Noting that the impact of the 2022 shocks is still being felt, he underscores the recent turmoil in the banking system to view the current situation as “quite fragile.”
“More than a year after the invasion of Ukraine and the outbreak of more contagious variants of COVID-19, many economies are still absorbing the shocks. The recent tightening of financial conditions is also hampering the recovery,” the report says.
According to the IMF, as a result, many economies are “likely” to experience slower income growth in 2023, while unemployment is rising.
Among the advanced economies, however, the forecasts for the US economy improve, for which it foresees an expansion of the Gross Domestic Product (GDP) of 1.6% this year and 1.1% in 2024, plus 0.2 pp and 0.1 pp more than in January.
In relation to the euro zone, it points to growth of 0.8% this year (0.1 pp more than in January) and 1.4% in 2024 (-0.2 pp than in January).
For Japan, it points to an expansion of 1.3% this year and 1% in 2024.
Among emerging market and developing economies, it kept China’s growth rates at 5.2% this year and 4.5% in 2024, while it revised India’s down to 5.9% in 2023 and 6 .3% in 2024 (-0.2 pp and -0.5 pp than before). ).
He also notes that inflation should fall this year, due to lower commodity prices, but core inflation will likely fall more slowly.
For the IMF, the spillover effects of rapidly rising interest rates are emerging as banking sector vulnerabilities have become a focus and contagion fears have risen in the financial sector, including non-bank financial institutions, but considers that the decision makers “took strong measures to stabilize the banking system.”
The institution recommends that, “more than ever”, policy makers must communicate clearly, considering that fiscal policy must play an active role, that is, through consolidation to allow the construction of financial buffers.
On the other hand, he argues that, “with financial instability contained, monetary policy should remain focused on reducing inflation, but ready to adjust quickly to financial developments” and that regulators and supervisors should also strengthen supervision and actively manage market tensions. to prevent weaknesses from getting worse.
Source: TSF
