Global growth to fall from an estimated 3.5% in 2022 to 3% in 2023, 24: IMF

July 26, 2023 (MLN): Global growth is projected to fall from an estimated 3.5% in 2022 to 3% in both 2023 and 2024, according to the World Economic Outlook (WEO) for July 2023 issued by International Monetary Fund (IMF).

“While the forecast for 2023 is modestly higher than predicted in the April 2023 WEO, it remains weak by historical standards,” it reads.

The rise in central bank policy rates to fight inflation continues to weigh on economic activity.

The IMF further highlighted that global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024 and the Underlying (core) inflation is projected to decline more gradually, forecasts for inflation in 2024 have been revised upward.

The recent resolution of the US debt ceiling standoff and, earlier this year, strong action by authorities to contain turbulence in US and Swiss banking, reduced the immediate risks of financial sector turmoil.

This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside.

“Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy,” it further stated.

Moreover, the financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow, partly due to unresolved real estate problems, with negative cross-border spillovers.

The outlook further emphasized that the sovereign debt distress could spread to a wider group of economies.

On the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient.

In most economies, the priority remains to achieve sustained disinflation while ensuring financial stability.

“Therefore, central banks should remain focused on restoring price stability and strengthening financial supervision and risk monitoring,” it added.

Furthermore, the outlook states that countries should provide liquidity promptly while mitigating the possibility of moral hazard.

They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable. Improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.

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