IMF: World Economy “Limping, Not Accelerating”
Having suffered blows from the Covid pandemic, armed conflict in Ukraine, and now war in Israel, the global economy has slowed but has not collapsed.
The International Monetary Fund (IMF) published an annual report entitled “World Economic Outlook: Navigating Global Divergences,” the central point of which is the 2023 slowdown in global economic growth and further slowdown next year. According to IMF analysts, “the slowdown will mostly affect economically developed countries and, to a lesser extent, developing countries.”
The report, presented at the IMF annual meeting in Marrakesh, Morocco, forecasts that “global GDP will grow by 3% in 2023, which means a 0.5% slowdown from the previous year.” Global growth will continue to lag next year, slowing to +2.9% (the previous growth estimate for 2024 was 3%). Pierre-Olivier Gourinchas, director of economic research at the IMF, who presented the report, said that “the world economy is limping, not accelerating.”
Among the main reasons for the slowdown, the report’s authors pointed to the escalation of the armed conflict between Russia and Ukraine, as well as the growing fragmentation of the global economy, which threatens dangerous disruptions in supply chains. There are also some “cyclical” factors, including tightening monetary policies by central banks around the world to combat inflation and reduce the availability of government financial assistance, as well as extreme climatic events that certainly did not occur in 2023. Thus, for several days now, transport has not been working in Hong Kong, schools and many companies are closed, including the stock exchange, due to Typhoon Koinu.
Global inflation continues to slow, falling from 9.2% year-on-year in 2022 to 5.9% this year, with a forecast of 4.8% for 2024. Core inflation, which excludes food and energy prices, is expected to fall, albeit more slowly, to 4.5% next year. However, most countries will not be able to return their cost of living growth to the target of 2% until 2025.
According to IMF experts, economic and financial forecasts are “increasingly consistent” with the “soft landing” scenario. In advanced economies, “growth will slow from 2.6% in 2022 to 1.5% this year and 1.4% in 2024.” In the USA, things are better than expected, while in the eurozone and the EU as a whole, things are slightly worse than forecasted. The US economy will grow by at least 2.1% in 2023, slowing to 1.5% in 2024. Estimates have been revised upward by +0.3% for 2023 and +0.5% for 2024, compared to estimates published by the IMF in July.
On the other hand, the GDP of the European single currency area is expected to grow by only 0.7% this year (0.2% less than the IMF estimate in July) and by 1.2% (-0.3%) in 2024. The eurozone economy will be held back by Germany, which the Fund estimates is entering a recession with GDP contracting by 0.5% and returning to growth by 0.9% in 2024.
Finally, the IMF report states that emerging market economies “are expected to grow by 4% both this year and in 2024.” In China, growth will slow due to the crisis in the real estate sector. China’s GDP will grow by 5% in 2023 (-0.2% compared to the July estimate) and by 4% (-0.3%) in 2024. India’s growth is predicted to surpass that of China. In the period 2023-2024, India’s economic activity is expected to grow at 6.3% per year.
