The International Monetary Fund (IMF) is raising its expectations for the world economy in 2023 to 2.9 percent growth – 0.2 percentage points more than in the previous forecast.
Growth will therefore still be lower than the average in recent years, but the outlook has improved since the previous forecast from the IMF in October, when they predicted growth of 2.7 percent in 2023.
The low growth is due, among other things, to Russia’s invasion of Ukraine and its consequences, economic decline and high inflation. But surprisingly strong consumption and investment, in addition to China’s decision to lift the strict corona lockdowns, may make the year somewhat brighter than first thought.
– The coming year will continue to be challenging. But there may well be a turning point with growth bottoming out and inflation falling, says IMF chief economist Pierre-Olivier Gourinchas.
– No global recession
The IMF points in particular to Germany and Italy as countries that are likely to avoid recession in 2023, which was previously predicted to happen. Growth in Europe has proven to be more resilient than expected, despite the consequences of the war in Ukraine.
The fund also does not expect global gross domestic product (GDP) to shrink, and Gourinchas notes that we are far from “any kind of global recession marker”.
The reopening in China points to a rapid recovery in the country’s economic activity, says Gourinchas. China is the world’s second largest economy and has previously contributed up to 40 percent of global growth.
This year, the IMF predicts that China’s economy will grow by 5.2 percent – 0.8 percentage points more than previously thought.
Worst for Britain
It is worse to go in the UK. There, the economy will shrink by 0.6 per cent this year, if the IMF’s predictions are correct. This is a downward adjustment from the previous forecast, which predicted growth of 0.3 percent.
With that, the country now has the worst economic prospects of all the world’s developed countries – including Russia, writes Sky News.
The reason is, among other things, the country’s tight monetary policy and the sky-high energy prices that continue to weigh on the household economy.
– The match not won
Although the economic outlook in the forecast did not worsen this time around, the IMF warns that the challenges are still in the queue.
An escalation of the war in Ukraine could affect food and energy prices globally, and China’s recovery could stall due to the crisis in the real estate market or large outbreaks of corona infection. In addition, stubborn inflation can lead to further tightening by the world’s central banks and hold back economic activity.
– The battle against inflation has not yet been won, says Gourinchas.
And the results of the measures taken against inflation will probably not be fully felt until 2024, says the chief economist.
