‘Surprisingly resilient’: IMF raises global growth forecasts | International Monetary Fund
The International Monetary Fund (IMF) has raised its 2023 global growth forecast slightly due to “surprisingly resilient” demand in the United States and Europe and the reopening of China’s economy after Beijing’s abandon their strict zero-COVID strategy.
The IMF said global growth would still fall to 2.9 percent in 2023 from 3.4 percent in 2022, but its latest World Economic Outlook forecasts signal an improvement on the October forecast. of 2.7 percent growth this year, with warnings that the world could easily go into recession. .
For 2024, the IMF said that global growth will accelerate slightly to 3.1 percent, but that interest rate increases by central banks around the world will slow demand.
IMF chief economist Pierre-Olivier Gourinchas said recession risks had receded and central banks were making progress in controlling inflation, but more work was needed to lower prices, and that new unrest could come from the escalation of the war in Ukraine and China’s battle against COVID-19. 19.
“We have to be ready to expect the unexpected, but it could be a turning point, with growth going down and then inflation going down,” Gourinchas told reporters about the 2023 outlook.
Strong demand
In its gross domestic product (GDP) forecasts for 2023, the IMF said it now expects US GDP growth of 1.4 percent, up from the 1.0 percent forecast in October and after 2.0 percent growth in 2022. consumption and investment in the third quarter of 2022, a strong labor market and strong consumer balance sheets.
It said the eurozone had made similar gains, with 2023 growth for the bloc now forecast at 0.7 percent, compared with 0.5 percent in the October forecast, after 3.5 percent growth in 2022. The IMF said that Europe had accepted higher energy costs faster than expected, and a reduction in energy prices had helped the region.
The United Kingdom was the only major advanced economy expected by the IMF to be in recession this year, forecasting GDP to contract by 0.6 percent as people struggle with spending. rising living, including power and mortgages.
China reopens
The IMF revised China’s growth forecast significantly higher for 2023, to 5.2 percent from 4.4 percent in the October forecast after its ‘zero-COVID’ strategy kept the economy afloat back. China’s growth rate was 3.0 percent in 2022, below the global average for the first time in more than 40 years.
However, the fund said China’s growth “will fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business momentum and slow progress on re -structural improvements”.
Meanwhile, it maintained India’s outlook for growth in 2023 to drop to 6.1 percent but back to 6.8 percent in 2024, in line with its 2022 performance.
Gourinchas said together, the two Asian power economies will contribute more than 50 percent of global growth in 2023.
He admitted that China’s reopening would put some upward pressure on commodity prices, but “on balance, I think we see China’s reopening as a benefit to the global economy” because it will help easing production bottlenecks that have exacerbated inflation and by creating more demand from Chinese households.
Even with China opening up again, the IMF expects oil prices to fall in both 2023 and 2024 due to lower global growth compared to 2022.
Risks
The IMF said both upside and downside risks were on the horizon, with built-up savings creating the potential for sustained growth in demand, particularly for tourism, and easing labor market pressures in some of advanced economies helping to cool inflation, reducing demand. for increasing aggression levels.
But he detailed both lower and higher risks, including a wider COVID-19 outbreak in China and the country’s worsening property turmoil.
An escalation of the war in Ukraine could lead to another spike in energy and food prices, as could a cold northern winter next year as Europe struggles to replenish gas storage and compete with China for liquefied natural gas supplies, the fund said.
Gourinchas said that central banks must be vigilant and be more certain that inflation is on the way down, especially in countries where real interest rates are still low, such as in Europe.
“So we’re just saying, look, take monetary policy at least slightly above neutral and keep it there. And then evaluate what is going on with price dynamics and how the economy is responding, and there will be enough time to change course, so that we are not too tight,” said Gourinchas.
