- Global growth forecast is unchanged at 3.0% in 2023
- Inflation is falling but “not there yet” – Chief Economist of the International Monetary Fund
- The International Monetary Fund raises its forecasts for the United States and lowers its forecasts for China and the eurozone
Marrakesh, Morocco (Reuters) – The International Monetary Fund on Tuesday lowered its growth forecasts for China and the euro zone and said overall global growth remained low and uneven despite what it described as the “remarkable strength” of the U.S. economy.
The IMF left its forecast for global real GDP growth in 2023 unchanged at 3.0% in its latest World Economic Outlook (WEO), but lowered its forecast for 2024 by 0.1 percentage point to 2.9% from the July forecast. Global output growth of 3.5% in 2022
IMF Chief Economist Pierre-Olivier Gorinchas told reporters that the global economy continues to recover from the Covid-19 pandemic, the Russian invasion of Ukraine and the energy crisis last year, but growth trends are increasingly diverging around the world, and medium-term growth prospects are mixed. . “middle.”
Overall, expectations point to a soft landing, but the IMF remained concerned about risks associated with China’s real estate crisis, volatile commodity prices, geopolitical fragmentation, and the return of inflation, Gorinchas said.
An unexpected new risk emerged in the form of the Israeli-Palestinian conflict when financial officials from 190 countries gathered in Marrakesh for the annual meetings of the International Monetary Fund and the World Bank, but it came after the close of the IMF’s quarterly forecast update last September. .26.
Gorincha told Reuters it was too early to determine how a major escalation in the long-running conflict would affect the global economy. “Depending on how the situation may unfold, there are many very different scenarios that we have not yet begun to explore, so we cannot make any assessment at this stage yet,” he added.
The IMF said stronger growth is being hampered by the ongoing impact of the pandemic, Russia’s war in Ukraine and growing fragmentation, along with rising interest rates, extreme weather events and shrinking fiscal support. Total global output in 2023 is expected to be 3.4%, or nearly $3.6 trillion, lower than pre-pandemic projections.
“The global economy is showing resilience,” Gorinchas told Reuters in an interview. “It has not been defeated by the major shocks it has suffered in the past two or three years, but it is not in a good position either.” “We’re seeing a global economy that’s faltering, and it’s not taking off very quickly yet.”
The medium-term outlook is no better. The International Monetary Fund expects growth of 3.1% in 2028, well below its five-year forecast of 4.9% on the eve of the global financial crisis of 2008-2009.
“There is uncertainty. There is geographic economic fragmentation, low productivity growth and low demographics. If you put all these things together you will find a slowdown in growth in the medium term,” he told Reuters.
There is no clear answer to inflation
Inflation has continued to decline around the world due to lower energy and, to a lesser extent, food prices. It is expected to decline to an annual average of 6.9% in 2023, from 8.7% in 2022, and to 5.8% in 2024.
Core inflation, excluding food and energy prices, is gradually declining, and is expected to decline to 6.3% in 2023, from 6.4% in 2022, and to 5.3% in 2024, given continued tightening of labor markets and services that are more stable than expected. . The International Monetary Fund said that inflation.
“We have not reached this goal yet,” Gorinchas said in a separate meeting with reporters, adding that the International Monetary Fund was warning monetary authorities against easing interest rates too early.
Labor markets in general were very buoyant and unemployment rates were at historic lows in most advanced economies, but there was little evidence of a wage-price spiral that could lead to a second round of price inflation, even with a major strike by industry workers. Cars in the United States in 2008. United States.
“We don’t see strong signs of an out-of-control cascade of wages chasing prices and prices chasing wages,” he said.
The IMF said uncertainty has narrowed significantly since publishing its forecasts in April, but there are still more downside than upside risks for 2024. The chance of growth falling is now expected to fall below 2% – which it has. Only five times since 1970 – to 15%. Compared to 25% in April.
The IMF noted that investment was uniformly lower than before the pandemic, as companies showed less willingness to expand and take risks amid rising interest rates, withdrawal of financial support, and tighter lending conditions.
Gorinchas said the Fund advises countries to remain vigilant on monetary policy until inflation falls permanently toward targets, while urging them to rebuild limited fiscal margins to face future challenges or shocks.
Growth in the United States exceeds pre-pandemic expectations
The International Monetary Fund raised its growth forecast for the United States, the world’s largest economy, by 0.3 percentage point to 2.1% for 2023, and by 0.5 percentage point to 1.5% for next year, citing stronger business investment and consumption growth. This makes the United States the only major economy to exceed pre-pandemic expectations.
In China, by contrast, GDP was expected to expand by 5.0% in 2023 and 4.2% in 2024, reflecting downward revisions of 0.2 and 0.3 percentage points, respectively, mainly due to the real estate crisis. In the country and weak external demand.
Gorinchas said China needs “strong measures” to clean up the real estate sector, and although the authorities have taken some steps, more work is needed. “If this does not happen, there is a possibility that the problem will worsen and worsen,” he added.
The International Monetary Fund also lowered its euro zone growth estimates to 0.7% in 2023 and 1.2% in 2024, down from July forecasts of 0.9% and 1.5%, respectively.
The UK, which like the euro zone was hit hard by the energy price shock, saw its growth forecast rise by 0.1 percentage point to 0.5% for 2023, but fall by 0.4 percentage point to 0.6% for 2024.
The International Monetary Fund said that Japan is expected to see growth of 2.0% in 2023, an increase of 0.6 percentage points, supported by pent-up demand, rising inbound tourism, its accommodative monetary policy, and a recovery in automobile exports. It left Japan’s growth forecast for 2024 unchanged at 1.0%.
(Reporting by Andrea Shalal – Prepared by Muhammad for the Arab Bulletin) Edited by Andrea Ricci
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