The International Monetary Fund (IMF) drew a panorama of extreme complexity for the world economy, in a process of high inflation and recession for all the world’s economies. The only country that maintained the growth forecast that it had diagnosed in the April report was Argentina, both for 2022 and 2023. In this way, it maintained the growth projections at 4 percent in 2022, and at At the same time, it lowered estimates for this year’s global economy for the third time in a row, calling the outlook increasingly “bleak” due to inflation and the fallout from the Russian-Ukrainian war.
According to new projections from the body led by Kristalina Georgieva, the world economy will slow from last year’s 6.1 percent rebound to 3.2 percent during 2022, which represents 0.4 percentage points less than in the last “World Perspectives” report carried out by the multilateral organization in April, and 1.2 less than in January. Likewise, for next year an expansion of 2.9 percent is expected, compared to the 3.6 percent that was calculated three months ago.
In the case of Argentina, a growth of 4 percent is projected for this year and 3 percent for 2023, the same estimates as in April when they had increased by 1 and 0.5 points, respectively.
According to the report, world production “shrank in the second quarter of this year, due to recessions in China and Russia.” “The global economy, still affected by the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy outlook, and many of the downside risks that were flagged in our April report have begun to materialize,” he said. the agency’s chief economist, Pierre-Olivier Gourinchas, in a blog post that accompanied the report’s release. The economist warned that the world “could be teetering on the brink of a global recession, just two years after the last one.”
During the second quarter, world production fell due to several factors, among which the IMF mentions “higher-than-expected inflation, especially in the United States and the main European economies” that caused a “tightening of conditions global financials.
To this are added “the slowdown in China that was worse than anticipated and that reflects the outbreaks and quarantines by Covid-19 in that country”, and “other negative side effects of the war in Ukraine”. The drop in global projections was driven especially by setbacks in the main advanced economies: the United States, China and the Euro zone.
United States, the biggest downward revision
In the case of the United States, the country obtained the largest downward revision, with growth expected for this year of only 2.3 percent, which represents 1.4 percentage points less than in the previous estimate, due to the fall in the purchasing power of households and the tightening of monetary policy.
Meanwhile, for next year the slowdown is expected to continue with an estimated expansion of 1 percent. Similarly, in China, the new quarantines and the deepening of the real estate crisis led to a drop in projections to 3.3 percent, 1.1 points less than the IMF expected and far from 5.5 percent that the government of that country set as a goal.
In the Eurozone, meanwhile, an expansion of 2.6 percent (-0.2 points compared to April) is expected, with growth of 1.2 percent in Germany (-0.9), 2.3 percent in France (-0.6), 3 percent in Italy (+0.7) and 4 percent in Spain (-0.8).
Meanwhile, Russia’s economy would collapse 6% this year due to Western sanctions, a percentage less than the 8.5% expected in April given that its contraction in the second quarter “was less than projected”, and ” exports of crude oil and non-energy products held up better than expected”. For its part, Ukraine would fall 45 percent, although the IMF pointed out that this estimate must be taken with “extreme uncertainty.”
Latin America
In Latin America and contrary to the main economies, the IMF revised upwards the projected growth of Brazil and Mexico to 1.7% (+0.9) and 2.4% (+0.4), respectively, although it modified them to down for next year.
In the report, the body led by Kristalina Georgieva emphasized the international rise in inflation, “partly motivated by the growth in food and energy prices”, in addition to the “impact of cost pressures due to disruptions in supply chains and the lack of supply in labor markets”.
The IMF now projects inflation to average 6.6 percent in advanced economies and 9.5 percent in emerging and developing countries, implying an upward revision of 0.9 percent and 0.8 percent. cent, respectively.