IMF raises growth forecast in 2023 due to reopening of China and strength in US and Europe

The International Monetary Fund on Tuesday slightly raised its 2023 global growth outlook due to “surprisingly resilient” demand in the United States and Europe, easing energy costs and the reopening of China’s economy after Beijing abandoned its strict restrictions against Covid-19.

The IMF said global growth will still fall to 2.9% in 2023 from 3.4% in 2022, but its latest forecasts in the Global Economic Outlook mark an improvement on the October forecast of 2.7% growth. this year, with warnings that the world could easily slide into recession.

For 2024, the IMF said global growth will pick up slightly to 3.1%, but this is 0.1 percentage point lower than the October forecast, as the full impact of the sharper rise in central bank interest rates eases. the demand.

IMF chief economist Pierre-Olivier Gourinchas said recession risks had eased and central banks were making progress in controlling inflation, but more work needed to contain prices and further disruptions could come from further escalation. the war in Ukraine and China’s battle with Covid-19.

“We have to be prepared to expect the unexpected, but this could very well represent a tipping point, with growth bottoming out and then inflation coming down,” Gourinchas told reporters about the outlook for 2023.

STRONG DEMAND

In its 2023 GDP forecasts, the IMF said it now expects US growth of 1.4%, up from the 1.0% rate forecast in October and after growth of 2.0% in 2022. The Fund cited stronger than expected consumption and investment in the third quarter of 2022, a robust job market and strong consumer balance sheets.

The IMF also said the euro zone had seen similar gains, with 2023 growth for the bloc now forecast at 0.7%, against 0.5% in the October outlook, after expansion of 3.5% in 2022. IMF said Europe had adapted to higher energy costs more quickly than expected, and an easing of energy prices had helped the region.

The UK was the only major advanced economy the IMF predicted to be in recession this year, with a 0.6% drop in GDP as households struggle with rising costs of living, including for energy and mortgages.

REOPENING OF CHINA

The IMF has revised China’s growth outlook for 2023 to 5.2% from 4.4% in its October forecast, after the “Covid-zero 2022” lockdowns reduced China’s growth rate to 3.0 % —a pace below the global average for the first time in more than 40 years, but the boost to China’s renewed mobility will be short-lived.

The Fund added that China’s expansion “will decline to 4.5% in 2024 before settling below 4% in the medium term, amid declining business momentum and slow progress on structural reforms”.

IMF sees Brazil’s GDP growth of 1.2% in 2023 and 1.5% in 2024

Brazil’s growth prospects this year saw a slight improvement in the accounts of the International Monetary Fund, which highlighted a greater-than-expected “fiscal support” in the country in its Global Economic Perspective report.

The update of the projections released on Monday shows that the Gross Domestic Product of Brazil should grow 1.2% this year according to the IMF, from an estimated 1.0% increase in December and well below the projected 3.1% expansion. for 2022.

On the other hand, the estimate for 2024 fell by 0.4 percentage points, with expectations now of 1.5% expansion of the economy.

The IMF’s scenario for this year is better than that expected by analysts consulted in the Central Bank’s Focus survey, which see an expansion of just 0.8% of GDP according to the most recent survey. But for 2024 the accounts coincide.

The Central Bank, on the other hand, projected in December an expansion of 1.0% of the GDP in 2023, after an estimated growth of 2.9% in 2022. The government of Luiz Inácio Lula da Silva should publish its first estimates for the activity in March .

LATIN AMERICA

According to the IMF report, growth in Latin America and the Caribbean should slow down from 3.9% in 2022 to 1.8% in 2023, with an upward revision of 0.1 percentage point in the account for this year compared to to the October report.

This revision reflects the improvement in Brazil’s account, as well as a 0.5 percentage point increase in Mexico’s expansion estimate for this year, to 1.7%.

According to the IMF, this is due to “unexpected resilience in domestic demand, higher-than-expected growth in major trading partners and, in Brazil, higher-than-expected fiscal support,” according to the report.

Last year, the government adopted fiscal incentive measures, such as reducing the ICMS rate on fuel, energy and telecommunications, as well as cutting federal taxes, which helped consumption. In January, the Lula government renewed until February the exemption of federal taxes on gasoline and until the end of this year the taxation on diesel and gas.

In addition, at the end of 2022, the Transition PEC was approved, which, among other measures, guaranteed the extension until the end of this year of the payment of BRL 600 per month to low-income families in the Bolsa Família program.

The region’s growth is expected to accelerate to 2.1% in 2024, although there has been a downward revision of 0.3 percentage points to that estimate, reflecting tighter financial conditions, lower export commodity prices and downward revisions to partner growth. commercial purposes, according to the Fund.

For the group of emerging markets and developing economies, of which Brazil is a part, the IMF raised its growth estimate this year by 0.3 point and lowered the next year by 0.1 point, to 4.0% and 4 .2% respectively, after an expansion in 2022 projected at 3.9%.