WASHINGTON: The International Monetary Fund (IMF) has lowered its global economic growth forecast for 2023, citing concerns over high inflation, rising geopolitical tensions, and financial stability.
In its World Economic Outlook report, the global lender predicts the global economy will grow by merely 2.8 percent this year and three percent in the preceding 2024, a decline of 0.1 percentage point from its previous forecasts in January.
Close to 90 percent of advanced economies are expected to experience slowing growth this year, while Asia’s emerging markets are predicted to account for half of all growth, with India and China leading the way.
Despite economic worries and geopolitical tensions, the IMF predicts that most countries will avoid a recession this year. However, low-income countries are expected to suffer a double shock from a decline in demand for their exports and higher borrowing costs due to high-interest rates, which could worsen poverty and hunger.
The IMF also warns that persistent economic vows could overshadow the IMF and World Bank (WB) economic plans to promote an ambitious reform and fundraising agenda at this year’s spring meetings.
IMF chief economist Pierre-Olivier Gourinchas stated that “the global economy remains on track and record a gradual recovery from the pandemic and Russia’s war in Ukraine,” but also noted that “serious financial stability related downside risks have emerged,” referring to the recent banking turmoil caused by the collapse of Californian high-tech lender Silicon Valley Bank.
IMF predicts global growth at 3.0 percent in 2028
Looking forward, the IMF predicts that global growth will fall to 3.0 percent in 2028, its lowest medium-term prediction since the 1990s. Slowing population growth and concerns about low productivity in many countries, coupled with geopolitical tensions and fragmentation, are expected to weigh on growth.
Germany is on the brink of recession, with the IMF predicting a contraction of 0.1 percent this year. The United Kingdom is the only other G7 country expected to enter a recession in 2023. The Euro area is expected to grow by merely 0.8 percent this year and 1.4 percent in 2024, led by Spain, which will see 1.5 percent growth this year and a two percent growth in 2024.
China’s economy is forecast to grow by 5.2 percent in 2023, but its growth is forecasted to slow to 4.5 percent next year as the impact of its reopening from the global Covid-19 pandemic restrictions. India’s economic prediction has been downgraded compared to January, but the country is still predicted to grow by 5.9 percent in 2023 and 6.3 percent in 2024.
The IMF expects global inflation to slow to 7.0 percent this year, down from 8.7 percent last year. However, both 2023 and 2024 inflation predictions were revised upwards and remain significantly over the two percent target set by the United States (US) Federal Reserve and other central banks worldwide, suggesting policymakers have a long way to go before inflation is brought under control.
Overall, the IMF’s updated forecasts paint a gloomy picture of slowing global growth in the short and medium terms, with concerns over inflation, geopolitical tensions, and low productivity sapping the economic outlook.
