The organization now expects the global economy to expand from 5.9% growth in 2021 to 4.4% this year. This is half a percentage point lower than predicted in October, reflecting some changes.
It’s the new Omicron COVID-19 Many countries have re-imposed travel restrictions, slowing the economic recovery.
Rising energy prices and supply disruptions have also resulted in higher and broader inflation than anticipated, particularly in the United States and many emerging markets and developing economies.
America and China
The revision was largely the result of forecast declines in the two largest economies, the United States and China.
As for the United States, the organization is removing the Build Back Better fiscal policy package from its calculations, after the legislation stalled in Congress. It is also the cause of the end of the stimulus and the continued shortage of supply.
Due to all these factors, the economy will grow 4% this year, 1.2 percentage points lower than originally forecast.
In China, the real estate sector is continuing to decline, private consumption is recovering more slowly than expected, and disruptions caused by the pandemic are related to zero tolerance. COVID-19 policy, caused a downgrade of 0.8 percentage points.
Inflation and 2023
For the year 2023, IMF is expecting global growth to slow to 3.8%.
This is 0.2 percentage points higher than the previous estimate, reflecting an expected growth, after current growth constraints disappear in the second half of 2022.
The forecast assumes that adverse health outcomes will decline to low levels in most countries by year-end, assumes that immunization rates improve worldwide and therapies become more effective. .
On the other hand, high inflation is expected to last longer than envisioned, with ongoing supply chain disruptions and high energy prices continuing throughout the year.
This index will decrease gradually when the imbalance between supply and demand is adjusted for the year and monetary policy in major economies reacts.
Risk
In its update, the IMF warned that new variants could prolong the pandemic and cause new economic disruptions.
Above all, Supply chain disruptions, volatile energy prices and domestic wage pressure mean there is a lot of uncertainty around inflation and the direction of policy.
As advanced economies raise policy rates, risks to emerging market and financial stability as well as capital flows, currencies and financial positions of developing economies may emerge. especially with the dramatic increase in debt levels over the past two years.
Other risks are geopolitical tensions and an ongoing climate emergency, meaning the likelihood of major natural disasters remains elevated.
Cooperation is the key to development
With the pandemic continuing, the IMF believes that the need for an effective global health strategy is more evident than ever.
Worldwide access to vaccines, tests and treatments is essential to reduce the risk of other variants. This requires increased production of supplies, better domestic distribution systems, and more equitable international distribution.
The Fund believes that monetary policy in many countries will need to remain tight to contain inflationary pressures, but fiscal policy will also need to prioritize spending on health and society.
In this context, the IMF argues that International cooperation will be essential to maintain liquidity access and promote orderly restructuring of the national debt, if necessary.
