IMF lowers its global growth forecast, predicting that most countries will avoid a recession.

The IMF revised its January predictions downward by 0.1 percentage point to predict that the world economy will expand by 2.8% this year and 3% in 2024.

Washington:

Geopolitical worries and Despite the economics, the International Monetary Fund on Tuesday modestly downgraded its outlook for the world economy and predicted that the majority of nations will escape a recession this year.
The IMF revised its January predictions downward by 0.1 percentage point to predict that the world economy will expand by 2.8% this year and 3% in 2024.

In 2023, the American economy is projected to expand by 1.6 percent, which is 0.2 percentage points more than the IMF’s earlier prediction. Next year, US growth is forecast to fall to 1.1%, up 0.1 percentage points from this January.

In a press conference held in advance of the waiver of the IMF’s (WEO) World Economic Outlook report, chief economist Pierre-Olivier Gourinchas stated that the global economy is recovering from the shocks of the previous few years, particularly the pandemic and the Russian invasion of Ukraine.

The World Bank and IMF’s top executives intend to utilize this year’s leap meetings to advance a comprehensive reform and funding agenda.

Their efforts, however, are likely to be overshadowed by member states’ worries about financial stability, increased geopolitical tension, and excessive inflation.

Advanced economies hinder growth: The WEO paints a bleak overall picture, with global growth predicted to decline both short- and long-term.

According to IMF control director Kristalina Georgieva, nearly 90% of advanced economies would have sluggish growth this year, whereas Asia’s emerging nations are anticipated to witness significant increases in economic production, with India and China estimated to account for 50% of all growth.

Meanwhile, Georgieva predicted that low-income nations would experience double amazement from higher borrowing expenses brought on by high-interest rates and a decline in export demand. This might make hunger and poverty worse.

According to WEO predictions, the IMF anticipates global inflation to decline from 8.7%% last year to 7% this year.

This number continues to be much higher than the two % target fixed by the other central banks worldwide and US Federal Reserve, indicating that monetary planners still have a ways to go before they can get inflation under control.

According to Gourinchas, the IMF’s baseline predictions presume that the financial fluctuation brought on by Silicon Valley Bank’s demise last month has been largely controlled by the “forceful actions” of authorities on both sides of the Atlantic.

However, he added that policymakers and central banks must play a significant part in bolstering financial stability moving forward.

On the verge of a recession, Germany

Despite the slowing growth, it is still anticipated that almost all advanced economies will evade a recession this year and next.

Along with the US, the Euro area is anticipated to expand by 0.8% this year and 1.4% next year, overseen by Spain, which will experience growth of 1.5% in 2023 and 2% in 2024.

The only other G7 economy anticipated to experience a recession this year is Germany, which is now predicted to drop by 0.1 percent.

The situation is better among developing market economies, with China’s growth being predicted to be 5.2 percent this year. However, as the effects of its reopening following the Covid-19 pandemic fade, it is anticipated that its economic growth will slow to 4.5 % in 2024.

Despite a drop from the January prediction, India’s economy is still expected to rise by 5.9% this year and 6.3 % in 2024, giving the global economy some much-needed stimulus.

And despite its invasion of Ukraine, Russia is now projected to rise by 0.7 % this year, up 0.3 percentage points from the forecast released in January.

Poor productivity affects the forecast over the medium run.

The IMF predicts that by 2028, global growth would have slowed to 3%, its lowest medium-term prediction since 1990.

According to Daniel Leigh, head of the World Economic Studies department in the IMF’s Research Department, the expected slowdown is largely caused by slowing population growth, the end of the period of economic catch-up by several countries, including China and South Korea, and worries about low productivity in many nations.

Before the release of the World Economic Outlook, he told reporters, “A lot of the intense hanging fruit was picked.”

He added that the current geopolitical unrest and fragmentation would have an adverse effect on economic growth.

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