The International Monetary Fund predicts a significant slowdown in the growth rate of the world economy and higher inflation in its new report on the economic outlook compared to the previous report in October.
Omicron’s impact on growth is estimated to fade from the second quarter, with its rate falling to 4.4% this year from 5.9% in 2021, half a percentage point lower than the October forecast. For 2023, the Fund forecasts a further slowdown in global growth to 3.8%, which is, however, slightly higher than the October forecast (3.6%) and mainly reflects the recovery after the elimination of negative factors.
Inflation is expected to remain higher than expected in October, with continuing supply chain disruptions and high energy prices continuing into 2022. Assuming inflation expectations remain stable, “inflation is expected to continue.” to gradually reduce as supply and demand imbalances will weaken in 2022 and there will be a reaction of monetary policy in large economies “.
The IMF notes that the global economic recovery continues amid many difficulties as we enter the third year of the pandemic. “The rapid spread of the Omicron variant has led to new mobility restrictions in many countries and increased labor shortages. Supply disturbances continue to negatively affect activity and contribute to inflation, exacerbating pressures from strong demand and rising energy and food prices. “In addition, record debt and rising inflation are limiting the ability of many countries to deal with new turmoil.”
A larger revision has been made to US growth forecasts by 1.2 percentage points, to 4% from 5.6% in October, mainly due to the non-vote on the budget package promoted by the Biden government (Build Back Better), continuing supply disruptions and earlier withdrawal of monetary support.
China’s outlook is also down 0.8 percentage points, with growth at 4.8% from 8.1% last year due to continuing pressure on the real estate sector and a weaker-than-expected recovery. of private consumption.
For the Eurozone, the IMF also downgraded its growth forecast to 3.9% from 5.2% last year and 4.3% from the previous forecast. Of the countries in the region, the largest decline concerns Germany (0.8 points) due to the greater impact of supply chain disruptions on its economy.
“Although the recovery continues, the problematic divergence in prospects between countries remains. While developed economies are projected to return to the pre-pandemic trend this year, many emerging and emerging market economies are expected to experience significant production losses in the medium term. “The number of people living in extreme poverty is estimated to have increased by about 70 million in 2021 compared to the pre-pandemic trend, reversing many years of progress in eradicating poverty.”
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