IMF global economic outlook sees slight growth, but inflation still a drag

Global growth will see a slight improvement, compared to previous International Monetary Fund projections, but “many challenges still cloud the horizon, and it is too early to celebrate”, the organisation’s chief economist said on Tuesday.

IMF economist Pierre-Olivier Gourinchas gave his assessment as the organisation projected that global economic growth will slow to an estimated 3 per cent in 2023 and 2024, down from 3.5 per cent in 2022.

The latest projection reflects a 0.2 per cent increase from the April projections, when IMF leadership said the world economy was expected to grow less than 3 per cent this year, increasing the risk of hunger and poverty globally.

Despite the slight improvement, global growth “remains weak by historical standards”, the IMF report states. But Gourinchas said in a Tuesday blog post that “in the near term, the signs of progress are undeniable”.

The IMF also predicts that global inflation is expected to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023, and 5.2 per cent in 2024.

The organisation’s economists said that when the United States was able to fend off an unprecedented default by resolving the debt-ceiling stand-off earlier this summer, that in part “moderated adverse risks to the outlook”.

But it said the threat of higher inflation due to Russia’s invasion of Ukraine and extreme weather could lead central banks to hike interest rates or cause world leaders to enact more restrictive economic policies.

In addition, China’s slow recovery following the reopening of its economy after the pandemic “shows signs of losing steam”, the IMF said.

The US economy has proved surprisingly resilient in the face of sharply higher borrowing costs. Employers are adding a strong 278,000 jobs a month so far this year; and at 3.6 per cent in June, the unemployment rate is not far off a half-century low.

US Federal Reserve Chair Jerome Powell and other officials will gather this week for their latest decision on interest rates, hoping to achieve a ‘soft landing’, which is the goal of curbing inflation without causing a deep recession.

AP