The world economy is caught in a storm of shocks and uncertainties as it tries to recover from covid-19, according to the IMF, which on Tuesday revised down its growth forecasts and warning of the many risks ahead. “The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, faces an increasingly gloomy and uncertain outlook,” International Monetary Fund Chief Economist Pierre-Olivier Gourinchas observes in a blog post.
“Many risks” mentioned by the IMF in its latest April forecasts “have begun to materialize,” he warns, and “the world could soon find itself on the brink of a global recession, just two years after the last one.” Consequently, only 3.2% global growth is now expected in 2022, that is, 0.4 points less than forecast in April.
“This reflects the slowdown in growth in the world’s three largest economies – the United States, China and the euro zone – with important consequences for the global outlook,” observes Pierre-Olivier Gourinchas. The US growth forecast for this year is lowered by 1.4 points compared to April, to 2.3%, due to “weaker growth at the beginning of the year” and the consequences of high inflation.
China registered “a slowdown worse than expected”, with an expected growth of 3.3% (-1.1 points) due to the closures linked to Covid-19, and “the worsening of the real estate crisis”. The growth forecast for the euro zone has been lowered by only 0.2 points, to 2.6%, weighed down by Germany, France and Spain, as a result, among others, of the war in Ukraine.
La Russie en revenge, que fait face à une vague de internationales sanctions en répercussions à cette attack, devrait voir son économie plonger a peu moins qu’attendu in 2022, of 6%, et non de 8.5% comme anticipé il ya tres months. War in Ukraine, inflation, sharp economic slowdown in China: “Several shocks have hit a world economy already weakened by the pandemic,” says the IMF.
Prices continue to rise around the world. Inflation is expected to reach 8.3% this year worldwide (+0.9 points from April forecasts). The war in Ukraine has caused food and energy prices to skyrocket, hitting the poorest populations especially hard. Given this, central banks, including the US Fed and Europe’s ECB, have begun to turn off the liquidity tap to restrict consumption and ease pressure on prices.
But it will not come without harm, warns the IMF: “Tighter monetary policy will inevitably have economic costs, but any delay will only exacerbate them.” To protect the most vulnerable populations, “targeted budget support (from governments) can help cushion the impact”, however, without increasing public debt, because interest rates have risen, warns the Bretton Woods institution.
For 2023, the global forecast is further downgraded, losing 0.7 points, to fall to 2.9%, due in particular to the consequences of the fight against inflation. And the reality could be even worse, since the risks weighing on the economy are numerous. The war in Ukraine pourrait faire croître plus avant les prix de l’énergie, et “a complete arrêt des exports de gas russe vers les économies européennes en 2022 ferait greatly augmenter l’inflation dans le monde à cause de prix de l’énergie plus students”.
The fight against inflation could be “more costly than expected”, underlines the IMF, who points out that “the risk of recession is particularly important in 2023”. And the tightening of financial conditions, by raising interest rates, could cause situations of over-indebtedness in emerging and developing countries. Global growth, which had fallen by 3.1% in 2020 due to the effect of Covid-19, rebounded by 6.1% in 2021.
Source: BFM TV
