The International Monetary Fund (IMF) raised its global growth forecast for 2023 slightly due to “surprisingly resilient” demand in the United States and Europe and the reopening of the Chinese economy after Beijing abandoned its strict regime. A COVID-free strategy.
The International Monetary Fund said that global growth will still decline to 2.9 percent in 2023 from 3.4 percent in 2022, but its latest forecasts for the global economic outlook point to an improvement compared to October expected growth of 2.7 percent This year, with warnings that the world could easily slip into recession.
For 2024, the International Monetary Fund said global growth would accelerate slightly to 3.1%, but interest rate hikes by central banks around the world should slow demand.
The chief economist of the International Monetary Fund, Pierre-Olivier Gourenchas, said recession risks have receded and central banks are making progress in controlling inflation, but more work is needed to rein in prices, and new unrest could come from further escalation. The war in Ukraine and China’s fight against COVID-19.
“We have to be kind of prepared to expect the unexpected, but it could be a turning point, with growth subsiding and then inflation subsiding,” Gorinchas told reporters about the outlook for 2023.
Strong request
In its 2023 GDP outlook, the IMF said it now expects US gross domestic product to grow by 1.4 percent, up from the 1.0 percent projected in October and following 2.0 percent growth in 2022.
The fund cited stronger-than-expected consumption and investment in the third quarter of 2022, a strong job market and strong consumer balance sheets.
It said the eurozone had similar gains, with growth in the 2023 bloc now expected to be 0.7 percent, compared with 0.5 percent in the October forecast, after growth of 3.5 percent in 2022. The International Monetary Fund said Europe had adjusted to higher costs. Energy more quickly than expected, lower energy prices have helped the region.
The UK was the only major developed economy that the IMF predicted would be in recession this year.
It expected the British economy to shrink 0.6 percent this year, compared to a previous forecast of 0.3 percent growth. She added that people are struggling to raise interest rates, and government moves to further tighten spending reduce growth.
“These figures underscore that we are not immune from the pressures on almost all advanced economies,” said Chancellor of the Exchequer Jeremy Hunt, responding to the IMF’s forecasts. “Short-term challenges should not cloud our long-term prospects – the UK beat many forecasts last year, and if we stick to our inflation halving plan, the UK can still be expected to grow faster than Germany and Japan over the coming years. “
Reopening of China
The International Monetary Fund revised its growth forecast for China sharply higher for 2023, to 5.2 percent from 4.4 percent in the October forecast after its ‘zero COVID’ strategy crippled the economy. China’s growth rate reached 3.0% in 2022, below the global average for the first time in more than 40 years.
However, the fund added that China’s growth “will decline to 4.5 percent in 2024 before stabilizing at less than 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms.”
At the same time, it maintained India’s forecast of growth declining in 2023 to 6.1 percent but rebounding to 6.8 percent in 2024, matching its performance in 2022.
Gorinchas said the two strong Asian economies will contribute more than 50 percent of global growth in 2023.
He acknowledged that reopening China would put some upward pressure on commodity prices, but that “in general, I think we view China’s reopening as a benefit to the global economy” because it will help ease production bottlenecks that have exacerbated inflation and by creating more demand from households. Chinese.
Even as China reopens, the International Monetary Fund projects that oil prices will decline in both 2023 and 2024 due to lower global growth than in 2022.
Risks
The International Monetary Fund said that there are ups and downs risks to the prospects, as the accumulated savings create the possibility of sustainable growth in demand, especially for tourism, and the easing of labor market pressures in some advanced economies, which helps to calm inflation, and reduce the need. Extensive price hike.
But he detailed more and more downside risks, including the large-scale outbreak of COVID-19 in China and the worsening condition of the country. property disorder.
that Escalation of the war in Ukraine The fund said that the rise in energy and food prices may lead to a further rise in energy and food prices, as well as a cold winter in the north next year as Europe struggles to refill gas stocks and competes with China for supplies of liquefied natural gas.
Gorenchas said central banks need to remain vigilant and be more certain that inflation is on a downward trajectory, particularly in countries where real interest rates remain low, such as Europe.
So we’re just saying, look, keep monetary policy a little bit above neutral at the very least and keep it there. Then assess what is happening with the price dynamics and how the economy is responding, and there will be plenty of time to adjust course, so that we avoid over-tightening.”