The International Monetary Fund (IMF) has lowered its forecast for global economic growth by 0.1 percentage points from January expectations to 2.8% for 2023, and lowered its forecast for 2024 by 0.1 percentage points to 3%.
“At first glance, the global economy appears poised for a gradual recovery from the massive blows of the pandemic and Russia’s unprovoked war with Ukraine. China is rebounding strongly after reopening its economy. Supply chain disruptions are subsiding, as well as disruptions to energy and food markets caused by the war. At the same time, the massive and synchronous tightening of monetary policy by most central banks should begin to take effect, and inflation will return to its targets. According to our latest forecast, global economic growth will hit a low point this year at 2.8%, before rising slightly to 3% in 2024. Global inflation will decline, albeit more slowly than initially expected, from 8.7% in 2022 to 7% this year and 4.9% in 2024.” – wrote economic counsellor Pierre-Olivier Gourinchas in the report “World Economic Outlook, April 2023 Update.”
Gourinchas pointed out that the sharp tightening of policy and its impact on the financial sector is worrisome.
“More worrisome is that the rapid policy tightening of the past 12 months is beginning to have serious spillover effects on the financial sector, as we have repeatedly warned could happen (October 2022 Global Financial Stability Report; January 2023 World Economic Outlook [WEO] Update). After a prolonged period of subdued inflation and exceptionally low interest rates, last year’s rapid monetary tightening caused significant losses on long-term fixed-income assets. The stability of any financial system depends on its ability to absorb losses without reaching for taxpayers’ money. Last fall’s financial instability in the United Kingdom and the recent banking turmoil in the United States, which resulted in the collapse of several regional banks, illustrate that significant vulnerabilities exist among both banks and non-bank financial institutions. In both cases, authorities took swift and decisive action and have been able to limit the spread of the crisis to date (April 2023 Global Financial Stability Report). However, the financial system may be put to the test again,” Gourinchas also wrote.
The Fund revised upward the path of global consumer inflation (annual average) by 0.4 percentage points to 7% in 2023, and by 0.6 percentage points to 4.9% in 2024.
Source: IMF and ISBnews
