The global economic growth prediction has been revised downward by 0.2 percentage points to 2.7%, said IMF recently when releasing its World Economic Outlook October 2022.
The global economy continues to face steep challenges, shaped by the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China, the fund noted.
The global economic growth prediction for this year is unchanged at 3.2%, according to IMF, adding that the 2023 slowdown will be broad-based, with countries accounting for about one-third of the global economy poised to contract this year or next.
- The three largest economies, the United States, China, and the euro area will continue to stall. Overall, this year’s shocks will re-open economic wounds that were only partially healed post-pandemic. In short, the worst is yet to come and, for many people, 2023 will feel like a recession.
- In the US, the tightening of monetary and financial conditions will slow growth to 1% next year.
- China's growth next year has been lowered to 4.4% due to a weakening property sector and continued lockdowns.
- The slowdown is most pronounced in the euro area, where the energy crisis caused by the war will continue to take a heavy toll, reducing growth to 0.5 percent in 2023.
- Despite the economic slowdown, inflation pressures are proving broader and more persistent than anticipated.
- Global inflation is now expected to peak at 9.5% this year before decelerating to 4.1% by 2024.
- Inflation is also broadening well beyond food and energy. Global core inflation rose from an annualised monthly rate of 4.2% at end-2021 to 6.7% in July for the median country.
- Downside risks to the outlook remain elevated, while policy trade-offs to address the cost-of-living crisis have become more challenging.
Global financial conditions could deteriorate, and the dollar strengthen further, should turmoil in financial markets erupt, pushing investors towards safe assets, IMF said.
This would add significantly to inflation pressures and financial fragilities in the rest of the world, especially emerging markets and developing economies, the fund added.
Inflation could, yet again, prove more persistent, especially if labor markets remain extremely tight, IMF warned.