The International Monetary Fund (IMF) has downgraded its estimate of global economic growth this year. According to the Fund’s updated forecast, global gross domestic product (GDP) will increase by 2.8 percent, while in January the IMF estimated this year’s growth at 2.9 percent. Uncertain signs earlier this year that the global economy could achieve a soft landing with slower inflation and steady growth have receded due to persistently high inflation and recent turmoil in the financial sector, the IMF said in its outlook today.
The weakest medium-term forecast in decades
This year’s growth rate will slow from last year’s 3.4 percent. Next year, the fund expects growth to accelerate to 3 percent. However, the IMF has slightly downgraded its outlook for next year, expecting 3.1 percent growth in January. Over the next five years, it is expected to stabilise at an average of five per cent, the weakest medium-term forecast in decades.
Underlying price pressures persist
The IMF warned that while inflation has slowed as central banks have raised interest rates and food and energy prices have fallen, underlying price pressures remain and labour markets are tight in many economies. The spillover effects of interest rate rises are also beginning to show, banking sector vulnerabilities have come to the fore and fears of contagion in the wider financial sector have increased. At the same time, the major forces that shaped the global economy last year look set to continue. Debt levels remain high, commodity prices have softened, but war continues and geopolitical tensions are high.
The IMF also warned that given current risks, the outlook could worsen and the chances of a hard landing have risen sharply. Tensions in the financial sector could intensify and any contagion would weaken the real economy as financing conditions deteriorate. The war in Ukraine could also intensify, leading to higher food and energy prices.
Source: CTK
