IMF cuts global GDP forecast as economic outlook remains bleak

The International Monetary Fund on Tuesday cut its global growth forecasts for 2022 and 2023, calling the world’s economic outlook “gloomy and uncertain”.

The IMF now expects the global economy to grow by 3.2% this year, slowing further to a 2.9% GDP rate in 2023. April predictions.

The Washington-based firm said the revised outlook indicates the downside risks outlined in its previous report are now materializing. Those challenges include rising global inflation, a worse-than-expected recession in China and fallout from the war in Ukraine.

“A temporary recovery in 2021 is followed by increasingly gloomy developments in 2022,” the report said.

“Several shocks have hit a global economy already weakened by the pandemic: higher-than-expected inflation globally – particularly in the US and major European economies – fueling tighter financial conditions; a worse-than-expected recession in China, reflecting the COVID19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine, ” it added.

The expected slowdown would mark the first quarterly contraction in global real GDP since 2020. A “plausible” but less alternative scenario would see global growth fall to 2.6% in 2022 and 2.0% in 2023, the IMF said. 10% result since 1970

Last month, the World Bank cut its rate 2022 global growth will be 2.9% 4.1% from the previous estimate, citing similar macroeconomic pressures.

The US, China and India are leading the downgrades

Worse growth prospects in the US, China and India prompted the IMF’s downward revisions.

The U.S. GDP outlook was cut by 1.4 percentage points to 2.3% in the first half of 2022, reflecting weaker-than-expected growth, household purchasing power and tightening monetary policy.

Following extended Covid lockdowns and a deepening real estate crisis, China’s economy was seen growing 1.1 percentage points lower than earlier estimates. The world’s second-largest economy is now expected to grow by 3.3% in 2022 – its slowest clip in four decades, barring an early fall from the Covid-19 crisis in 2020.

The IMF lowered its global growth outlook in July as global inflation, a worse-than-expected slowdown in China and fallout from the war in Ukraine fueled a food and energy crisis.

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India’s forecast was cut by 0.8 percentage points to 7.4%, largely due to less favorable external conditions and accelerated policy tightening.

Meanwhile, the euro zone’s outlook was cut by 0.2 percentage points to 2.6%, although the IMF said a steep fall from the war in Ukraine could hit further in 2023, particularly in the key economies of Germany, France and Spain.

Russia’s economy shrank less than expected in the second quarter despite widespread sanctions over its unprovoked invasion of Ukraine, the IMF said. Its 2022 forecast has been revised up to 2.5 percentage points, although its estimated growth rate remains negative at -6.0%.

Global inflation continues to rise

As inflation continues to rise through 2022, food and energy prices will rise.

Global inflation is forecast to be 6.6% in advanced economies and 9.5% in emerging market and developing economies this year – an upward revision of 0.9 and 0.8 percentage points, respectively.

With rising prices fueling a global cost-of-living crisis, curbing inflation should be a top priority for policymakers, the IMF said.

“Tighter monetary policy will inevitably have real economic costs, but delay will make them worse,” it said.

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