The International Monetary Fund (IMF) raised its global growth outlook for 2023 slightly on the back of a “surprising recovery” in demand in the United States and Europe as well as the reopening of the Chinese economy after Beijing. Kinh renounces strict policies. no COVID strategy.
The IMF says global growth will still slow to 2.9% in 2023 from 3.4% in 2022, but its latest World Economic Outlook forecast marks an improvement over Expected October growth of 2.7% this year, with warnings that the world could easily slip into recession.
In 2024, the IMF says global growth will pick up slightly to 3.1%, but a hike in interest rates by central banks around the world will dampen demand.
IMF chief economist Pierre-Olivier Gourinchas said recession risks have eased and central banks are making progress in controlling inflation, but more work needs to be done to rein in prices. and new disruptions could result from further escalation of inflation. war in ukraine and China’s fight against COVID-19.
“We have to be prepared for the unexpected, but it could also represent a turning point, when growth bottoms and then inflation declines,” Gourinchas told reporters on the 2023 outlook. “.
strong demand
In its 2023 gross domestic product (GDP) forecast, the IMF said it now expects GDP growth in the US of 1.4%, up from the 1.0% predicted in October and after 2.0% growth in 2022.
The fund cites stronger-than-expected consumption and investment in the third quarter of 2022, a robust labor market and a strong consumer balance sheet.
It said the eurozone had posted similar gains, with the bloc’s 2023 growth now forecast at 0.7 per cent, compared with 0.5 per cent in the October outlook, following growth. 3.5% by 2022. The IMF says Europe has adapted to high energy costs faster than expected, and that falling energy prices have helped the region.
The UK is the only major advanced economy where the IMF predicts a recession this year.
It forecasts the UK economy will shrink 0.6 per cent this year, compared with a previous 0.3 per cent growth expectation. Residents are struggling with higher interest rates, and further government spending cuts are also holding back growth.
“These numbers confirm that we are not immune to pressures on nearly all advanced economies,” Finance Secretary Jeremy Hunt said in response to the IMF’s forecast. “Short-term challenges should not obscure our long-term outlook — the UK beat many forecasts last year and if we stick to our inflation halving plan, the UK is still projected to expected to grow faster than Germany and Japan in the coming years. “
China reopens
The IMF revised China’s growth outlook sharply higher for 2023, to 5.2% from 4.4% in its October forecast after the country’s ‘no COVID’ strategy stifled the economy. China’s growth rate is 3% in 2022, lower than 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% in 2024 before stabilizing to less than 4% over the medium term amid slowing business activity and progress on reform.” structure slows down”.
At the same time, it maintains India’s outlook for growth falling in 2023 to 6.1% but recovering to 6.8% in 2024, matching the 2022 performance.
Gourinchas jointly said that the two Asian powerhouse economies will contribute more than 50% of global growth by 2023.
He acknowledged that the reopening of China will put upward pressure on commodity prices, but “on balance, I think we see China reopening as a boon for the global economy.” ” as it will help ease the production bottlenecks that have worsened inflation and by generating more demand from Chinese households.
Even if China reopens, the IMF predicts that oil prices will fall in both 2023 and 2024 due to slower global growth compared to 2022.
risk
The outlook has both upside and downside risks, the IMF said, with cumulative savings creating the possibility of sustained demand growth, particularly for tourism, and easing labor market pressures in some areas. Advanced economies help cool inflation, easing the need for aggressive interest rate hikes.
But it does detail greater downside risks, including a broader COVID-19 outbreak in China and a worsening economic situation in the country. property disturbance.
One Escalation of the War in Ukraine The fund said it could lead to a spike in food and energy prices, as well as a cold northern winter next year as Europe struggles to refill its gas storage and compete with China for energy. liquefied natural gas supplies.
Gourinchas said central banks need to be more vigilant and certain that inflation is on the way down, especially in countries where real interest rates remain low, such as in Europe.
“So we’re just saying, look, at least take monetary policy a little above neutral and keep it there. And then gauge what’s going on with price dynamics and how the economy is reacting, and there’s plenty of time to adjust the direction, so we don’t over-tighten,” Gourinchas said. .
