Global growth is expected to slow further next year, the IMF said Tuesday, downgrading its forecasts as countries grapple with the fallout from Russia’s invasion of Ukraine, spiraling cost-of-living and economic downturns, AFP reported.
The world economy has been dealt multiple blows, with war in Ukraine driving up food and energy prices following the Covid-19 outbreak while soaring costs and rising interest rates threaten to reverberate around the globe.
“This year’s shocks will re-open economic wounds that were only partially healed post-pandemic,” said International Monetary Fund economic counsellor Pierre-Olivier Gourinchas in a blog post accompanying the fund’s latest World Economic Outlook.
More than a third of the global economy is headed for contraction this year or next, and the three biggest economies — the United States, European Union and China — will continue to stall, he warned.
“The worst is yet to come and, for many people 2023 will feel like a recession,” said Gourinchas.
In its report, the IMF trimmed its 2023 global GDP forecast to 2.7%, 0.2 points down from July expectations.
Its world growth forecast for this year remains unchanged at 3.2%.
The global growth profile is its “weakest” since 2001, apart from during the global financial crisis and the worst of the pandemic, said the IMF.
This reflects slowdowns for the biggest economies, including a US GDP contraction in the first half of 2022 and virus lockdowns in China on top of a property market crisis.
A key factor behind the slowdown is a shift in policy as central banks try to bring down soaring inflation, with higher interest rates starting to take the heat out of domestic demand.
Global inflation is expected to peak at 9.5% this year before dropping to 4.1% by 2024.
The IMF also has cut forecasts for the two biggest economies, United States and China, as well.
US economic growth is pegged at 1.6% this year, 0.7 points below the fund’s July forecast, due to an unexpected contraction this year.
A slowdown in the Euro area is expected to deepen next year, said the IMF, and growth in China is projected to hit its lowest rate in decades, expected to grow 3.2% this year, slightly lower than originally forecast.