Monday 20 March 2023

Global growth to fall to 2.9% this year: IMF

WASHINGTON, January 31, 2023

Global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024, according to the World Economic Outlook (WEO) from IMF.
The forecast for 2023 is 0.2 percentage point higher than predicted in the October 2022 outlook but below the historical (2000–19) average of 3.8 percent. 
Growth in the Middle East and Central Asia is projected to decline from 5.3 percent in 2022 to 3.2 percent in 2023, with a downward revision of 0.4 percentage point since October, mainly attributable to a steeper-than-expected growth slowdown in Saudi Arabia, from 8.7 percent in 2022 (which was stronger than expected by 1.1 percentage points) to 2.6 percent in 2023, with a negative revision of 1.1 percentage points. 
The downgrade for 2023 reflects mainly lower oil production in line with an agreement through Opec+, while non-oil growth is expected to remain robust.
The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of Covid-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery, it said.
Global inflation is expected to fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic (2017–19) levels of about 3.5 percent.
The balance of risks remains tilted to the downside, but adverse risks have moderated since the October 2022 WEO. On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible, it said. 
On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress. Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress, said the Outlook.
In most economies, amid the cost-of-living crisis, the priority remains achieving sustained disinflation. With tighter monetary conditions and lower growth potentially affecting financial and debt stability, it is necessary to deploy macroprudential tools and strengthen debt restructuring frameworks, it said.
Accelerating Covid-19 vaccinations in China would safeguard the recovery, with positive cross-border spillovers. Fiscal support should be better targeted at those most affected by elevated food and energy prices, and broad-based fiscal relief measures should be withdrawn. Stronger multilateral cooperation is essential to preserve the gains from the rules-based multilateral system and to mitigate climate change by limiting emissions and raising green investment, said the WEO.
Despite the headwinds, real GDP was surprisingly strong in the third quarter of 2022 in numerous economies, including the United States, the euro area, and major emerging market and developing economies. The sources of these surprises were in many cases domestic: stronger-than-expected private consumption and investment amid tight labor markets and greater-than-anticipated fiscal
support. Households spent more to satisfy pent-up demand, particularly on services, partly by drawing down their stock of savings as economies reopened. Business investment rose to meet demand. 
On the supply side, easing bottlenecks and declining transportation costs reduced pressures on input prices and allowed for a rebound in previously constrained sectors, such as motor vehicles, said the report.
Energy markets have adjusted faster than expected to the shock from Russia’s invasion of Ukraine. 
In the fourth quarter of 2022, however, this uptick is estimated to have faded in most -- though not all -- major economies. US growth remains stronger than expected, with consumers continuing to spend from their stock of savings (the personal saving rate is at its lowest in more than 60 years, except for July 2005), unemployment near historic lows, and plentiful job opportunities. But elsewhere, high-frequency activity indicators (such as business and consumer sentiment, purchasing manager surveys, and mobility indicators) generally point to a slowdown.
Economic activity in China slowed in the fourth quarter amid multiple large Covid-19 outbreaks in Beijing and other densely populated localities. Renewed lockdowns accompanied the outbreaks until the relaxation of Covid-19 restrictions in November
and December, which paved the way for a full reopening. 
Emerging markets
For emerging market and developing economies, growth is projected to rise modestly, from 3.9 percent in 2022 to 4 percent in 2023 and 4.2 percent in 2024, with an upward revision of 0.3 percentage point
for 2023 and a downward revision of 0.1 percentage point for 2024. About half of emerging market
and developing economies have lower growth in 2023 than in 2022.
Growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3 percent and 5.2
percent, respectively, after the deeper-than-expected slowdown in 2022 to 4.3 percent
attributable to China’s economy. China’s real GDP slowdown in the fourth quarter of 2022
implies a 0.2 percentage point downgrade for 2022 growth to 3.0 percent -- the first time in
more than 40 years with China’s growth below the global average. 
Growth in China is projected to rise to 5.2 percent in 2023, reflecting rapidly improving mobility, and to fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms. 
Growth in India is set to decline from 6.8 percent in 2022 to 6.1 percent in 2023 before picking up to 6.8 percent in 2024, with resilient domestic demand despite external headwinds. Growth in the ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, Thailand) is similarly projected to slow to 4.3 percent in 2023 and then pick up to 4.7 percent in 2024. - TradeArabia News Service


More Finance & Capital Market Stories

calendarCalendar of Events