WASHINGTON — The International Monetary Fund said on Monday it expects the global economy to slow this year as central banks continue to raise interest rates to keep inflation in check, but production is more resilient than previously expected. and a global recession could probably be avoided.
The IMF has revised up its economic growth forecasts for 2023 and 2024 in its closely-watched World Economic Outlook report, citing resilient consumers and a re-opening of the Chinese economy as one of the reasons for its more optimistic outlook. pointed out.
But the fund warned that the fight against inflation is far from over, urging central banks to avoid the temptation to change course.
“The fight against inflation is beginning to pay off, but central banks must continue their efforts,” IMF chief economist Pierre-Olivier Grinchat said in an essay accompanying the report.
Global production is projected to slow to 2.9% in 2023 from 3.4% last year, before recovering to 3.1% in 2024. Inflation is expected to drop from 8.8% in 2022 to 6.6% this year and 4.3% next year. .
After a string of downgrades in recent years as the pandemic worsened and Russia’s war in Ukraine intensified, the IMF’s latest forecast was more optimistic than the one the IMF announced in October.
Since then, China has abruptly abandoned its “zero Covid” policy of lockdowns to contain the pandemic and embarked on a swift reopening. The IMF also said Europe’s energy crisis was less severe than initially feared and that a weaker US dollar was providing relief to emerging markets.
The IMF previously predicted that a third of the global economy could slip into recession this year. However, Grinchas said in a news briefing ahead of the report’s release that far fewer countries would face a recession in 2023 and that the IMF was not predicting a global recession.
“Globally, or even given the number of countries that could go into recession, the risk of a recession has fallen significantly,” Grinchas said.
Despite a more hopeful outlook, global growth remains weak by historical standards and the war in Ukraine continues to weigh on economic activity and sow the seeds of uncertainty. The report also warned that the global economy still faces considerable risks, noting that “severe health damage in China could delay recovery and Russia’s war in Ukraine could escalate.” and tightening global funding costs could exacerbate debt problems.”
Growth in rich countries is expected to be particularly slow this year, with 9 out of 10 advanced economies likely to grow slower than in 2022.
The IMF expects US growth to slow to 1.4% this year from 2% in 2022. The unemployment rate he expects to rise from 3.5% to 5.2% next year, but there is still a chance of avoiding a recession in 2020. largest economy in the world.
“The path for the U.S. economy to avoid a full recession is narrow, or if it does, it will be relatively shallow,” Grinchath said.
The IMF said the slowdown in Europe will be more pronounced this year as the economic recovery from reopening fades and consumer confidence falters in the face of double-digit inflation. In the Eurozone, growth is projected to slow from 3.5% to 0.7%.
Chinese production is expected to pick up the slack by accelerating from 3% in 2022 to 5.2% in 2023.
Together, China and India are expected to account for about half of global growth this year. China’s economic trajectory will become a major driver of the global economy, IMF officials said at a Monday evening press conference, saying after a period of flux China was stable and ready for full production. pointed out that
However, Gourinchas said there are still signs of weakness in China’s property market and that growth could slow in 2024. The report described the sector as a “primary source of vulnerability” and said it could lead to more defaults by developers and destabilization of real estate. China’s financial sector.
It has been Russia that has made an astonishing contribution to global economic growth, suggesting that attempts by the West to paralyze its own economy appear to be waning. It is forecast to expand by 0.3% this year and 2.1% next year, reversing earlier forecasts of a sharp contraction in 2023 amid a series of Western sanctions.
A joint US-European plan to cap Russia’s oil export prices at $60 a barrel is not expected to significantly reduce the country’s energy revenues.
“At the current G7 ceiling price level, we do not expect a significant impact on Russian crude oil exports as Russian trade continues to be redirected from sanctioned to non-sanctioned countries,” the IMF said in a report. said.
One of the IMF’s most pressing concerns is the growing trend towards ‘fragmentation’. The war in Ukraine and the global response threaten to divide the nation into blocs, deepening pockets of geopolitical tensions and impeding economic progress.
“Fragmentation could intensify, further restricting the movement of capital, labor and international payments across borders, and hampering multilateral cooperation in the provision of global public goods,” the IMF said. Stated. “The costs of such fragmentation are particularly high in the short term, as it will take time to replace interrupted cross-border flows.”
