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The global economy faces another challenging year of subpar growth and hot inflation, though some downside risks in China and Europe have moderated, according to the IMF's latest projections.
The Washington-based fund raised its 2023 global GDP forecast two-tenths to 2.9%, still well below the average of 3.8% since 2000. Global inflation is expected to fall to 6.6% this year from 8.8% in 2022, much worse than the pre-Covid average of 3.5%.
"The outlook is less gloomy than in our October forecast," IMF research director Pierre-Olivier Gourinchas said in a blog post. "The fight against inflation is starting to pay off, but central banks must continue their efforts."
Europe has shown resilience amid the energy squeeze and the Ukraine war, while the IMF raised China's 2023 growth forecast 0.8pp to 5.2% citing easier Covid restrictions. While U.S. growth will slow this year to 1.4%, the estimate was raised 0.4pp on robust domestic demand last year.
On the downside, UK GDP was marked down 0.9pp to show a 0.6% contraction this year. The IMF pointed to "tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets."
The balance of risks remain negative, the IMF said, and core inflation hasn't peaked yet in most economies.
"The inflation news is encouraging, but the battle is far from won," Gourinchas said. "Inflation-adjusted interest rates remain low or even negative in the euro area and other economies, and there is significant uncertainty about both the speed and effectiveness of monetary tightening in many countries."
Source: IMF
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.