IMF Raises Economic Expectations for 2023
The International Monetary Fund (IMF) has increased its optimism about the global economy, projecting a growth rate of 3% in 2023. This represents a slight increase from its previous forecast of 2.8% in April, with expectations remaining steady at the same level in 2024, without any changes from the previous estimation.
However, despite the improved economic outlook compared to April, these projections indicate a slowdown in global growth to 3% this year, compared to the previous year, as the economic growth remains around these levels for some time. This slowdown is attributed to weak growth among advanced economies worldwide, as stated in a recent report by the IMF.
Pierre-Olivier Gourinchas, the Chief Economist at the IMF, remarked, “Our expectations for this year are improving, and inflation is receding. These are good news, but we have not fully recovered, and the growth is still weak, particularly due to noticeable deceleration in advanced economies.”
Interestingly, the performance of most advanced economies, including major emerging countries, has been better than the IMF’s earlier expectations, despite monetary policies being tightened almost everywhere to combat persistently high inflation.
In this context, the IMF predicts a slight improvement by the year-end, with inflation expected to reach 6.8% worldwide, which is 0.2 percentage point lower than the April forecast. By the end of 2024, inflation is projected to be at 5.2%, while the institution previously estimated it to be 0.3 percentage point lower in March.
Gourinchas clarified, “The significant slowdown is primarily attributed to price declines in China, especially in the manufacturing sector in the second quarter.”
The IMF emphasized the necessity to continue monetary restraint to achieve its inflation target, as its impact on the economy has proven to be much more flexible than expected, especially in emerging countries.
United States Avoids Recession
Regarding the G7 group, Germany is the only country expected to experience a recession in 2023, and this likelihood seems increasingly unavoidable, as the projections have become more severe than previously estimated in April. The IMF now expects a contraction of 0.3%, compared to the 0.1% projected in April.
On the other hand, other major European economies show signs of better resilience. Growth expectations for the French economy have risen to 0.8% (a 0.1 percentage point increase compared to April), and for the Italian economy to 1.1% (a 0.4 percentage point increase compared to April). The Spanish economy exhibits clear recovery with a growth rate of 2.5% (a full percentage point increase compared to April).