“Many risks” mentioned by the IMF in its latest forecasts in April “have begun to materialize”, warns the chief economist of the International Monetary Fund, Pierre-Olivier Gourinchas. (Photo: 123RF)
WASHINGTON — The global economy is caught in a storm of shocks and uncertainty as it tries to recover from COVID-19, according to the IMF, which on Tuesday downgraded its growth forecasts and warned of many risks ahead.
“The global economy, still reeling from the pandemic and the Russian invasion of Ukraine, faces an increasingly bleak and uncertain outlook,” observes the chief economist of the International Monetary Fund, Pierre -Olivier Gourinchas, in a blog post.
“Many risks” mentioned by the IMF in its latest forecasts in April “have started to materialize”, he warns, and “the world might soon find itself on the brink of a global recession, just two years following the last.
Consequently, global growth is now only expected at 3.2% in 2022, i.e. 0.4 points less than what was anticipated in April.
“This reflects the slowdown in growth in the three largest economies in the world – the United States, China and the euro zone – with important consequences for the global outlook”, observes Pierre-Olivier Gourinchas.
The growth forecast for the United States for this year is lowered by 1.4 points compared to April, to 2.3%, due to “weaker growth at the start of the year”, and the consequences of the high inflation.
China recorded “a slowdown worse than expected”, with 3.3% growth expected (-1.1 points) due to closures linked to COVID-19, and “the worsening of the real estate crisis”.
The growth forecast for the euro zone has been lowered by only 0.2 points, to 2.6%, weighed down by Germany, France and Spain, as a result, among other things, of the war in Ukraine.
“Shocks”
Russia, on the other hand, which is facing a wave of international sanctions in repercussions to this attack, should see its economy plunge a little less than expected in 2022, by 6%, and not by 8.5% as anticipated there is three months.
War in Ukraine, inflation, strong economic slowdown in China: “Several shocks have hit a world economy already weakened by the pandemic”, notes the IMF.
Prices keep going up all over the world. Inflation is expected to reach 8.3% this year worldwide (+0.9 points compared to April forecasts). The war in Ukraine has caused food and energy prices to soar, weighing particularly heavily on the poorest populations.
Faced with this, central banks, including the Fed in the United States and the ECB in Europe, have begun to turn off the liquidity tap to restrict consumption and ease pressure on prices.
But this will not come without harm, warns the IMF: “Stricter monetary policy will inevitably have economic costs, but any delay will only exacerbate them”.
To protect the most vulnerable populations, “targeted budgetary support (from governments) can help cushion the impact”, without however increasing public debt, because interest rates have increased, warns the institution. of Bretton Woods.
Many risks
For 2023, the global forecast is even more degraded, losing 0.7 points, to fall to 2.9%, due in particular to the consequences of the fight once morest inflation.
And the reality might turn out to be even worse, as the risks weighing on the economy are numerous.
The war in Ukraine might cause energy prices to rise more than before, and “a complete halt in Russian gas exports to European economies in 2022 would greatly increase inflation around the world due to lower oil prices. higher energy.
The fight once morest inflation might turn out to be “more costly than expected”, underlines the IMF, noting that “the risk of recession is particularly important in 2023”.
And the tightening of financial conditions, by driving up interest rates, might cause situations of over-indebtedness in emerging and developing countries.
Global growth, which had fallen by 3.1% in 2020 due to the effect of COVID-19, rebounded by 6.1% in 2021.
