The International Monetary Fund (IMF) has revised its world growth outlook slightly upwards for this year, attributing it to resilient service sector activity in Q1 and a robust labor market. However, despite this positive development, the IMF predicts a slowdown to three percent growth in 2023 and expects it to remain at that level. The report attributes this trend to weak growth in advanced economies worldwide.
During a press conference, IMF Chief Economist Pierre-Olivier Gourinchas emphasized that while the global economy is gradually recovering from the impact of the pandemic and Russia’s invasion of Ukraine, it is not yet completely stable.
The current year’s growth forecast has been raised by 0.2 percentage points from the IMF’s previous estimate in April, indicating a projected three percent growth for both 2023 and 2024. However, this is significantly lower than the growth rates of 6.3 percent in 2021 and 3.5 percent in 2022.
The IMF also mentioned that the global inflation situation has improved somewhat, with consumer prices now expected to increase by 6.8 percent this year, a 0.2 percentage point reduction from April’s forecast. This improvement is attributed partly to subdued inflation in China, where inflation is currently below the target rate, prompting the IMF to revise China’s inflation forecast for the year down sharply to 1.1 percent.
Regarding specific countries, the IMF has lifted its outlook for US growth this year to 1.8 percent, citing resilient consumption growth in Q1 and a tight labor market. However, it predicts a slowdown to 1.0 percent growth next year as pandemic-related savings deplete, leading to a loss of economic momentum.
The IMF anticipates much of this year’s global growth to come from emerging market and developing economies (EMDEs) like India and China, while advanced economies are expected to experience significant slowdowns this year and next. Advanced economies are now projected to grow by 1.5 percent this year and 1.4 percent in 2024.
Among the G7 economies, the IMF has upgraded the United Kingdom’s growth forecast for 2023 to 0.4 percent, with Germany being the only G7 economy expected to contract this year.
For EMDEs, the outlook is more optimistic, with forecasts of 4.0 percent growth this year and 4.1 percent next year. China’s growth forecast for 2023 remains unchanged at 5.2 percent, but the country faces challenges due to underperformance in investment and issues in the real estate sector.
India’s growth prospects for 2023 have been revised upward to 6.1 percent, thanks to strong domestic investment growth in Q4 of 2022.
As for Russia, the IMF expects its economy to grow by 1.5 percent this year, an increase of 0.8 percentage points from April’s estimate, driven by robust economic data supported by a significant fiscal stimulus. The Russian government’s budget deficit is expected to expand to 6.1 percent this year from 1.4 percent last year, according to an IMF spokesperson.