IMF: Global economy will continue to slow, expand just 2.8 pct. in 2023
Washington, Apr 11 (EFE).- The global economy will continue to slow and expand just 2.8 percent this year before rebounding moderately in 2024, the International Monetary Fund said in a report published Tuesday.
That multilateral institution recalled that those figures are historically very low but also noted that growth remains well above recession territory.
In its latest World Economic Outlook report, titled “A Rocky Recovery,” the IMF highlighted uncertain economic prospects globally and pointed out that many countries are still weathering the impact of the pandemic and Russia’s invasion of Ukraine, coping with persistently high inflation and struggling with restrictive financial conditions.
It also added that the “fog around the world economic outlook has thickened.”
In that regard, the fund recalled the recent increase in financial market volatility triggered by the unexpected failures of two regional banks in the United States last month and the “collapse of confidence” in major global bank Credit Suisse, as well as the confusion caused by “multiple indicators pointing in different directions.”
Nevertheless, the IMF ruled out the possibility of a global recession.
In a press conference, the fund’s chief economist, Pierre-Olivier Gourinchas, said the IMF is forecasting that global growth will bottom out at 2.8 percent in 2023 before rising modestly to 3 percent next year, noting that those projections are down only slightly from that institution’s January forecast.
He noted that this year’s slowdown is concentrated in the most developed economies, which the IMF projects will grow just 1.3 percent this year relative to 2022.
Two advanced economies whose economies are expected to shrink this year are Germany (-0.1 percent) and the United Kingdom (-0.3 percent).
The IMF is forecasting euro-area growth of just 0.8 percent this year and 1.4 percent in 2024. Of the large European economies, it is most bullish on Spain, whose gross domestic product is projected to expand by 1.5 percent in 2023 and 2 percent next year.
The outlook for the United States, the world’s largest economy, has improved slightly since January and is now projected to grow 1.6 percent this year and then continue to slow to 1.1 percent in 2024.
By contrast, emerging markets are projected to grow at a healthy clip of 3.9 percent this year and 4.2 percent in 2024.
China and India are expected to lead the way with growth of 5.2 percent and 5.9 percent, respectively, in 2023. China’s economy is then forecast to slow to 4.5 percent in 2024, while India’s GDP is expected to expand at a clip of 6.3 percent next year.
Growth in the Latin America and the Caribbean region is expected to be hampered by high inflation and slow considerably compared to 2022.
The report projects the region’s GDP will rise just 1.6 percent in 2023, a far cry from last year’s robust 4 percent growth rate.
Although global growth has continued within an environment of monetary tightening, Gourinchas said the recent banking instability is a reminder that the situation remains fragile.
The expert noted that the financial sector suffered sizable losses on long-term fixed-income assets and increased bank funding costs because it had become “too complacent” towards maturity and liquidity mismatches following a prolonged period of muted inflation and low interest rates.
“The brief instability last fall in the United Kingdom’s gilt (government bond) market and the recent banking turbulence in the United States illustrate instead that significant vulnerabilities do exist both among bank and non-bank financial institutions,” the IMF chief economist said.
“Increasing funding costs and the need to act more prudently, however, may push banks to cut down lending further,” Gourinchas noted, adding that such a scenario “would lead to an additional 0.3 percent reduction in output this year.”
Another risk identified by the IMF is persistently elevated inflation, which would force central banks to maintain high interest rates for longer than expected – and in turn have a cooling effect on the global economy.