IMF slightly lowers global growth forecast for 2023

For Pierre-Olivier Gourinchas, chief economist of the IMF, "we are still facing an economy in a recovery phase after the shocks of the pandemic and the war in Ukraine". (Illustrative image). AP - Jose Luis Magana

Text by: Internet Writing

3 min

The International Monetary Fund has revised down its global growth forecast for 2023 slightly, but expects major economic regions to avoid recession, according to data released Tuesday at its spring meetings in Washington.

Advertising

Read more

The institution now expects global growth of 2.8% in 2023, slightly down from its previous estimate in January: -0.1 percentage point. For 2024, the IMF expects global growth of 3%, which should also be the average expected over the next five years, the worst medium-term outlook since 1990. "We are still facing an economy in recovery from the shocks of the pandemic and the war in Ukraine. The reopening of China has allowed a strong rebound on the spot and tensions on supply chains are gradually disappearing," IMF chief economist Pierre-Olivier Gourinchas said at a press conference.

For most countries, however, a return to normalcy is not yet in sight. This is due in particular to the fact that inflation is expected to remain high in 2023, around 7% globally. "The massive response from central banks is starting to bring inflation closer to their 2% target. But in some countries, inflation has not yet reached its peak, which could force us to go further in monetary tightening, "that is to say in the rate hikes of central banks, detailed Pierre-Olivier Gourinchas.

Ups and downs in the financial sector

The task could be more complicated by the recent upheavals in the financial sector, particularly in the United States, following the collapse of three regional banks and the precipitous takeover of Credit Suisse by its competitor UBS, against a backdrop of rising rates by central banks, precisely to fight inflation. "The effects that monetary tightening can have on the financial sector may seem worrying. We have repeatedly stressed that the fight against inflation will not be an easy path to follow," said Pierre-Olivier Gourinchas. "Some hidden weaknesses surely exist, which is why regulators and supervisors need to be careful," he added.

Nevertheless, the IMF is revising upwards its growth forecasts for the United States in 2023, to 1.6%, as well as in the euro zone, to 0.8%, thanks in particular to Italy and Spain, while the France should see its economy slow (0.7%) and Germany flirt with recession (-0.1%).

Signs of weakness in China

This view is considered "too optimistic" by some analysts, who believe that the IMF "underestimates the impact of monetary tightening on advanced economies at the end of the year and next year". On China's side, with the reopening of its economy, after the abandonment of its strict zero-Covid policy at the beginning of the year, the economic recovery is confirmed. Chinese growth will even again play a role as an engine for global growth in 2023, at 5.2%, but slow down from 2024, to 4.5%, one of its weakest growth in the last 30 years, apart from 2020 with the pandemic, and 2022 with the zero-Covid policy.

However, it will benefit the global economy less, as it is mainly linked to domestic spending. Above all, there are signs of weakness that are prompting the IMF to be cautious in its forecasts. "There are risks to the Chinese economy, especially from the real estate sector. The reopening is also marked by an increase in consumption, but not as high as what has been observed in other countries, there is still caution on the part of consumers, "said the chief economist.

Russia, in particular, benefits from this commodity market, and, while six months ago, a severe recession was announced there, the economy should grow by 0.7% this year and 1.3% in 2024, despite the sanctions taken by Western economic powers.

(

With AFP)

Newsletter Receive all the international news directly in your mailbox

I subscribe

Follow all the international news by downloading the RFI application

Read on on the same topics:

• Economy
• IMF