The IMF has revised its global economic outlook upwards.
Norberto Duarte | AFP | Getty Images
The International Monetary Fund on Monday revised up its global growth forecasts for the year, but warned that higher interest rates and Russia’s invasion of Ukraine were likely still weighing on activity.
In its latest economic update, the IMF said the global economy will grow by 2.9% this year – a 0.2 percentage point improvement from its previous October forecast. However, that number would still represent a decline from a 3.4% expansion in 2022.
It also revised its 2024 forecast down to 3.1%.
“Growth will remain weak by historical standards as the fight against inflation and Russia’s war in Ukraine weigh on activity,” said Pierre-Olivier Gourinchas, director of research at the IMF, in a blog post.
The outlook for the global economy turned more positive on better than expected domestic factors in several countries such as the United States.
“Economic growth proved surprisingly robust in the third quarter of last year, with strong labor markets, resilient household consumption and business investment, and a better-than-expected adjustment to Europe’s energy crisis,” Gourinchas said, also noting that inflationary pressures have come down come.
In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth. a weaker one U.S. dollar has also brightened the outlook for emerging markets holding foreign currency debt.
However, the picture is not entirely positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy is not as bad as some had feared, “but less bad doesn’t mean quite good.”
“We have to be careful,” Georgieva said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.
The IMF on Monday warned of several factors that could worsen the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s protracted invasion of Ukraine could further shake energy and food costs; and markets could turn sour on worse than expected inflation numbers.
IMF calculations say about 84% of nations will face lower headline inflation this year compared to 2022, but they still project an average annual rate of 6.6% in 2023 and 4.3% the following year .
Therefore, the Washington, DC-based institution said that one of the top policy priorities is for central banks to keep tackling consumer price inflation.
“Clear communication from central banks and appropriate responses to shifts in data will help anchor inflation expectations and ease wage and price pressures,” the IMF said in its latest report.
“Central banks’ balance sheets need to be managed carefully given the market liquidity risks,” she added.
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