Washington, Jan 25 (EFE).- The International Monetary Fund on Tuesday lowered its 2022 global growth forecast to 4.4 percent – down from 4.9 percent in the Fund’s October projection – due mainly to reduced growth expectations for the world’s two biggest economies: the United States and China.
Besides the prevalence of the Omicron coronavirus variant, which the IMF predicts will significantly hinder global growth in the first quarter, that Washington DC-based international financial institution also cited high inflation in the US and a persistent housing market crisis in China as key obstacles to economic expansion.
“Growth slows as economies grapple with supply disruptions, higher inflation, record debt and persistent uncertainty,” IMF First Deputy Managing Director Gita Gopinath said in a blog post released in conjunction with the Fund’s latest World Economic Outlook report.
The Indian-American economist noted that the World Economic Outlook report anticipates that the Omicron coronavirus variant will weigh on activity in the first quarter of 2022 but that its effect will fade starting in the second quarter.
Global growth then is projected to slow to 3.8 percent in 2023, up two-tenths of a percentage point from the October forecast.
“The upgrade largely reflects a mechanical pickup after current drags on growth dissipate in the second half of 2022,” the Fund said.
Even so, the report said that forecast is conditional on improved vaccination rates worldwide, the development of more effective therapies and a decline in adverse health outcomes to low levels in most countries during 2022.
The IMF downwardly revised its outlook for US growth in 2022 by 1.2 percentage points to 4 percent because of the impact of inflation, earlier withdrawal of monetary accommodation and continued supply shortages.
In issuing a more pessimistic forecast for US economic growth, the IMF also took into account the fact that President Joe Biden’s ambitious Build Back Better climate and social policy spending bill has thus far stalled in the Senate.
Referring to China, the IMF lowered its 2022 growth forecast for the Asian giant by 0.8 percentage points to 4.8 percent due to “pandemic-induced disruptions related to the zero-tolerance Covid-19 policy and protracted financial stress among property developers.”
But the IMF continued to project that elevated inflation will be a short-term problem.
The Fund forecast that inflation will average 3.9 percent in advanced economies and 5.9 percent in emerging market and developing economies in 2022 but then subside in 2023.
Gopinath said for her part that price pressures are expected to persist for longer, though also expressing optimism.
“Supply-demand imbalances are assumed to decline over 2022 based on industry expectations of improved supply, as demand gradually re-balances from goods to services and extraordinary policy support is withdrawn.”
The expert, however, warned about “the troubling divergence in prospects” as recoveries continue.
“While advanced economies are projected to return to pre-pandemic trend this year, several emerging markets and developing economies are projected to have sizable output losses into the medium-term,” Gopinath said.
“The number of people living in extreme poverty is estimated to have been around 70 million higher than pre-pandemic trends in 2021, setting back the progress in poverty reduction by several years.” EFE