Finding that the global economy is better than predicted withstanding repeated shocks, the International Monetary Fund revised its growth forecast for 2023 for the better, estimating that the spectre of recession is fading for several countries, especially in the eurozone, while the recent full opening of China’s economy raises hopes for additional stimulus.
The IMF now forecasts a 2.9 percent growth rate for the world economy in 2023, according to its latest report released on Monday. This is a 0.2 percentage point higher rate than the previous forecast, released by the international financial institution in Washington in October.
“The outlook is less bleak than our forecast in October,” IMF chief economist Pierre-Olivier Gouransa commented during a conference call with reporters.
He warned that the year “will remain difficult “but that it” may “prove to be a” turning point “before growth picks up in 2024 and inflation” slows.”
The slowdown in activity is less severe than expected in several developed economies, especially the US (it is forecast to grow at a rate of 1.4% in 2023, 0.4% higher than that reported in October).
But in both Germany and Italy, the IMF is no longer afraid of a recession, contrary to estimates it made public in October. Growth in the eurozone, which has endured the energy crisis due to the war in Ukraine better than expected,is expected to reach 0.7% (+0.2% compared to the previous forecast).
An important factor is the complete opening of the Chinese economy, after the abrupt end of the zero COVID policy in December. Despite its chaotic management and a large increase in infections from the new coronavirus in China, this decision is expected to accelerate the growth of the Chinese economy (to 5,2%, from 4,4% predicted three months ago), giving a boost to the global economy, according to the IMF.
Inflation, which has risen to very high levels more or less everywhere in the world, is now slowing and is expected to be less high in 2023 than in 2022 in most countries, according to the fund’s forecasts.
The Washington institution, however, predicts that it will be higher than it said in October,reaching 6.6% (from 6.5%). However, it expects to return in 2024 to levels below those of 2021 (4.3% versus 4.7%).
The figures are more optimistic than those released by the World Bank in the middle of the month, predicting a further slowdown in global growth. But those forecasts were prepared before the end of restrictive measures to prevent the spread of the pandemic in China. Moreover, the parameters taken into account by the two institutions are different.
Recession in Britain
The three engines of the global economy —the US, China, Europe— show clear signs of resilience, for different reasons in each case. And all developed economies are expected to record growth this year, albeit weak.
Exception: Britain is expected to be the only G20 country to experience a recession this year, with GDP contraction expected to be 0.6% (this is slightly better than the 0.9% reported in October).
On the contrary, Russia may avoid recession, despite sanctions imposed by the international community after its military invaded Ukraine, registering marginal growth in 2023 (0.3%) and expected to accelerate in 2024 (+2.1%), according to the IMF.
Elsewhere in the world, rapid growth is forecast in sub-Saharan Africa (3.8%, almost unchanged from October), as well as in the Middle East and Central Asia (3.2%, 0.4% lower than October), much higher than the Latin American and Caribbean region, where it is expected to be below the global average (1.8%).
For the two engines of the Latin American economy —Brazil, Mexico-the growth forecast (1.2 and 1.7% respectively) is much lower than other large countries ranked among emerging economies, especially China and India (6.1%).
In 2024, global growth is expected to reach 3.1%, down slightly from what was forecast in October (-0.1%).
For this year and next “global growth will remain low relative to historical norms,” the IMF’s chief economist summed up.