WASHINGTON: The International Monetary Fund (IMF) has made a slight upgrade to its outlook for global growth in 2023, citing resilient service sector activity in the first quarter and a strong labor market.
According to the IMF’s latest report, global growth is now projected to reach three percent this year, up by 0.2 percentage points from the previous forecast in April. However, despite the upgrade, the IMF warns of slowing momentum in the global economy, with growth expected to stay at three percent in both 2023 and 2024.
“We’re not out of the woods yet and growth remains on the low side,” said IMF Chief Economist Pierre-Olivier Gourinchas in an interview with AFP ahead of the report’s publication.
The global economy experienced a growth rate of 6.3 percent in 2021, followed by 3.5 percent last year, but it is now expected to stabilize at three percent in the coming years. The IMF attributes the slowdown to weak growth among advanced economies and the end of the economic catch-up phase in countries like China and South Korea.
IMF Indicates Improvement in Global Inflation
The report also indicates an improvement in the global inflation picture, with consumer prices forecasted to increase by 6.8 percent this year, down 0.2 percentage points from the April forecast. The IMF attributes this improvement to subdued inflation in China, although global inflation remains well above pre-pandemic levels.
The IMF has raised its outlook for the US economy, projecting a growth rate of 1.8 percent for this year, up by 0.2 percentage points from April. The strong performance is driven by resilient consumption growth in the first quarter and a still-tight labor market. However, the IMF expects US growth to slow down to 1.0 percent next year as accumulated savings from the pandemic diminish and economic momentum wanes.
Emerging market and developing economies (EMDEs), particularly India and China, are expected to be the primary drivers of global growth this year. On the other hand, economic activity in advanced economies is predicted to slow significantly in 2023 and 2024.
While the IMF sees positive economic news from the United Kingdom, Germany remains the only G7 economy expected to contract this year. Among EMDEs, India’s growth prospects have been revised upwards to 6.1 percent, and Russia’s economy is expected to grow by 1.5 percent due to a large fiscal stimulus.
