IMF has improved forecasts for global economy, but road to recovery is just starting
The International Monetary Fund released new forecasts for the global economy and improved them compared to the previous publication in October, but stressed that the road to recovery is just beginning.
This is discussed in the updated World Economic Outlook.
IMF economists expect the global economy to slow this year and grow by 3.4% in 2022 and 2.9% in 2023 before recovering to 3.1% in 2024.
The forecast for 2023 improved by 0.2 percentage points, and for 2024 it deteriorated by 0.1 percentage points.
"Growth will remain weak by historical standards, as the fight against inflation and russia's war in Ukraine weigh on activity," the IMF notes.
The financial institution also added that next year could be a turning point when growth bottoms out and inflation declines.
The improvement in the forecast is due to the stability of economies in the third quarter of last year thanks to:
- strong labor markets,
- stable household consumption and business investments,
- better than expected adaptation to the energy crisis in Europe.
In addition, the sudden opening of China's economy this year is paving the way for the fastest recovery in activity. Global financial conditions improved as inflationary pressures began to ease.
For countries with developed economies, the slowdown will be more pronounced: from 2.7% last year to 1.2% and 1.4% this year and next.
Nine out of 10 advanced economies are likely to slow down. In particular, the US is expected to slow down to 1.4% this year, and the Eurozone — to 0.7%.
Emerging market countries have already passed the "bottom" and are expected to see their growth rise modestly to 4% and 4.2% this year and next.
The IMF emphasizes that India retains significant influence. And together with China, it will account for half of the global growth this year, while the United States and the Eurozone together account for only a tenth.
"This time around, the global economic outlook hasn't worsened. That's good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting," the IMF summarizes.
