The Washington institution is now counting on an increase in global gross domestic product of 4.4% (-0.5 percentage point compared to October) after 5.9% last year.

"The Omicron variant has led to new restrictions in many countries and an increase in labor shortages," said Gita Gopinath, who has just taken over as number 2 of the institution.

Supply chain disruptions are weighing on the recovery and fueling inflation.

They also add to a food and energy crisis.

"Additionally, record debt and rising inflation are limiting the ability of many countries to weather further disruptions," Gopinath said.

Gita Gopinath, Deputy Managing Director of the International Monetary Fund during an interview with AFP in Washington on January 25, 2022 Brendan Smialowski AFP

Inflation should rise this year on average in the advanced economies to 3.9% (+1.6 point) and in the emerging and developing economies to 5.9% (+1 point), before slowing down in 2023, detailed the IMF.

Growth forecasts have been revised downwards for a large majority of countries.

Only one region (Middle East and Central Asia) and a handful of economies of which India, Japan and Argentina are exceptions.

The slowdown in global growth is "essentially" the consequence of less vigorous expansion in the United States and China: respectively +4% (-1.2 points) and +4.8% (-0.8 points) expected this year, says the IMF.

In the case of the world's largest economy, the Fund has removed from its projections the benefits that Joe Biden's "Build Back Better" plan could bring.

It provides for some 1.8 trillion dollars in social spending but it is currently blocked in Congress.

IMF growth forecast Erin CONROY AFP

Moreover, inflation will remain high.

"Our base projection is inflation of about 3.4%" by the end of 2022", well above the 2% target by the Federal Reserve, Gita Gopinath told AFP.

China is faced with a decline in its real estate sector and weaker domestic consumption linked to the draconian measures aimed at containing Omicron.

Supply disruptions have led to lower forecasts elsewhere in the world such as in Germany (+3.8%, -0.8 points), the main economy of the euro zone whose growth projection is now 3.9% (-0.4 points).

France should see its GDP grow by 3.5% (-0.4 points).

Overall, the recovery continues but divergences between countries persist: while advanced economies should return to their pre-pandemic trend this year, it is not excluded that several emerging markets and developing economies will suffer a recession in the medium term, warns the IMF.

The International Monetary Fund in Washington.

Photo taken on January 10, 2022 Stefani Reynolds AFP

The "zero tolerance" strategy in question

The uncertainty surrounding these projections is great, but IMF economists agree that global growth is under multiple threats.

Starting with the "zero tolerance" strategy of Covid cases in China which risks exacerbating disruptions in global supply chains.

IMF growth forecasts Jonathan WALTER AFP

“Like all countries, they are going to have to readjust their policy,” Gita Gopinath told AFP, noting that “we are gradually moving towards this recognition that, thanks to vaccines, tests, therapeutic treatments, we can return to many more normality".

At the same time, higher inflation in the United States could lead to much more aggressive monetary tightening.

For now, the IMF is assuming three rate hikes this year and three next year.

If the Fed were to increase them faster and more strongly, emerging and developing countries, whose debt is denominated in dollars, would be directly affected.

The IMF also notes "growing geopolitical tensions" including the conflict between Russia and Ukraine likely to further fuel the rise in energy prices.

Gita Gopinath, Deputy Managing Director of the International Monetary Fund during an interview with AFP in Washington on January 25, 2022 Brendan Smialowski AFP

Not to mention, the possibility that variants more dangerous than Omicron appear.

In this context, control of the pandemic is essential and the IMF calls once again for widespread vaccinations in developing countries.

Currently, some 70% of the population of rich countries is fully immunized against less than 4% of the population of poor countries.

Despite recovering in 2021 from a historic recession, the IMF has calculated that global GDP may have been cut by $13.8 trillion between 2020 and 2024 due to the pandemic.

© 2022 AFP