WASHINGTON – The International Monetary Fund said on Monday that it expected the global economy to slow this year as central banks continue to raise interest rates to tame inflation, but it also that output will be more stable than previously predicted and that a global recession will occur. perhaps avoidable.
The IMF upgraded its economic growth forecasts for 2023 and 2024 in its closely watched World Economic Outlook report, pointing to resilient consumers and the reopening of the Chinese economy. is one of the reasons to have a more optimistic outlook.
However, the fund warned that the fight against inflation was not over and urged central banks to avoid the temptation to change course.
“The fight against inflation is beginning to bear fruit, but central banks must continue to work,” said Pierre-Olivier Gourinchas, chief economist at the IMF.
Global output is projected to decline to 2.9% in 2023, from 3.4% last year, before rebounding to 3.1% in 2024. Inflation is expected to slow to 6 .6% this year from 8.8% in 2022 and then drop to 4.3% next year.
After successive downgrades in recent years as the pandemic worsened and Russia’s war in Ukraine intensified, the IMF’s latest forecasts are more upbeat than those released in October. .
Since then, China has abruptly reversed its “Covid-free” lockdown policy to contain the pandemic and embarked on a rapid reopening. The IMF also said the energy crisis in Europe is less severe than initially feared and that the weakening of the US dollar is providing relief to emerging markets.
The IMF previously predicted that a third of the world economy could be in recession this year. However, Mr Gourinchas said in a press conference before the release of the report that very few countries are currently facing a recession in 2023 and the IMF does not forecast a global recession.
“We are seeing a much lower risk of recession, globally or even if we think about the number of countries that could be in recession,” said Gourinchas.
Despite the more upbeat outlook, global growth remains weak by historical standards and the war in Ukraine continues to weigh on operations and sow uncertainty. The report also warned that the global economy still faced significant risks, warning that “severe health conditions in China could stifle recovery, Russia’s war in Ukraine could be a major blow to the economy.” could escalate and tighter global financial costs could exacerbate debt problems.”
Growth in rich countries is expected to be particularly slow this year, with nine out of ten advanced economies likely to grow more slowly than in 2022.
The IMF forecasts growth in the United States will slow from 2% in 2022 to 1.4% this year. The organization expects the unemployment rate to rise from 3.5% to 5.2% next year, but still has the potential to avoid a recession in the United States. largest economy in the world.
“There is a narrow path that will allow the U.S. economy to come out of a recession entirely, or if there is a recession, then a relatively shallow recession,” Gourinchas said.
The slowdown in Europe will be more pronounced as momentum from the reopening of the region’s economies fades this year and consumer confidence declines in the face of inflation, the IMF said. play two numbers. In the euro area, growth is forecast to slow from 3.5% to 0.7%.
China is projected to recover with output accelerating to 5.2% in 2023 from 3% in 2022.
Combined, China and India are expected to account for about half of global growth this year. IMF officials said in a press conference on Monday evening that China’s economic trajectory will be the key driver for the world economy, noting that after a period of volatility, China seems as already stable and fully productive.
However, Mr. Gourinchas noted that there are still signs of weakness in China’s property market and that its growth could slow down in 2024. The report describes the sector as a “source of vulnerability. major injury” could lead to widespread developer defaults and instability in China’s financial sector.
A surprising contributor to global growth has been Russia, suggesting that efforts by Western nations to cripple its economy appear to be faltering. The IMF predicts that Russia’s output will grow by 0.3% this year and 2.1% next year, despite earlier forecasts of a sharp decline in 2023 amid a raft of Western sanctions. West.
A coordinated US-European plan to limit the price of Russian oil exports to $60 a barrel is not expected to significantly reduce the country’s energy revenues.
“At the current Group of Seven oil price ceiling, Russian crude oil export volumes are not expected to be significantly affected, with Russian trade continuing to be diverted from sanctioned countries. to non-sanctioned countries,” the IMF said in the report.
Among the IMF’s most pressing concerns is the growing trend of “fragmentation”. The war in Ukraine and the global response have divided nations into blocs and reinforced groups of geopolitical tensions that threaten to impede economic progress.
Fragmentation could increase – with more restrictions on international movement of capital, workers and payments across borders – and could impede multilateral cooperation in supply and demand, the IMF said. global supply of public goods”. “The cost of such fragmentation is particularly high in the short term, as replacing interrupted cross-border flows takes time.”
