IMF downgrades global growth outlook ahead of ‘dark and more uncertain’ months


IMF downgrades global growth outlook ahead of ‘dark and more uncertain’ months
Written by madishthestylebar

The next few months will be “dark and more uncertain” warns the International Monetary Fund (IMF), in its updated forecasts, published on Tuesday 26 July. The financial institution expects global growth of 3.2% in 2022, down 0.4 percentage point from its April forecast, then 2.9% in 2023, a sharp slowdown after the 6.1% recorded in 2021, the first year of recovery from the Covid-19 pandemic. Global gross domestic product (GDP) even suffered a contraction in the second quarter of 2022, just after the start of the Russian war in Ukraine.

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A poor performance attributed by the IMF to the“higher than expected inflation worldwide, especially in the US and major European economies”at “A bigger than expected slowdown in China” following the confinements linked to the health crisis and, finally, to the “negative fallout from the war in Ukraine”. “The shadow of the pandemic still hangs over the global economyrecalls Pierre-Olivier Gourinchas, chief economist of the IMF. It is partly responsible for the slowdown in China and the rise in inflation. »

Global growth is suffering from a deterioration in the economic situation in the three largest economies, namely China, the United States and the European Union. US growth is revised down to 2.3% for 2022 (against 3.7% forecast in April), while the reduction in household purchasing power and the tightening of monetary policy have been much greater there than expected, against a backdrop of galloping inflation. In June, consumer prices soared by 9.1% over one year, unheard of in forty years across the Atlantic, which led the Federal Reserve (Fed, central bank) to raise its rates in record time, which are now between 1.5% and 1.75%, whereas they were close to zero at the start of 2022.

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“Supply chain disruptions”

This tightening of monetary policy should increase unemployment in the coming months, warns the American think tank Peterson Institute for International Economics, in a note published in early July. The IMF also lowered its growth forecast for China by 1.1 percentage points to 3.3%, the worst performance in four decades (excluding the first year of the pandemic, in 2020), which he justifies by the “new confinements and the worsening of the real estate crisis”. This deceleration should bring in its wake that of emerging Asian countries, whose growth is revised downwards by 0.8 points in 2022.

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