IMF slightly lowers global economic outlook but predicts no recession for most countries

The International Monetary Fund (IMF) has released its World Economic Outlook (WEO) report, forecasting a slight decline in the global economy. The report predicts that most countries will avoid a recession this year, despite ongoing economic and geopolitical concerns.

According to the IMF, the global economy is expected to grow by 2.8% in 2023 and 3% in 2024, down 0.1% from its previous forecasts in January. The American economy is expected to grow by 1.6% in 2023, up 0.2% points from the IMF’s previous forecast.

IMF Chief Economist Pierre-Olivier Gourinchas stated in a press briefing that the global economy is recovering from the shocks of the last few years, including the pandemic and the Russian invasion of Ukraine.

The report also highlights concerns among member states over high inflation, rising geopolitical tension, and financial stability. The IMF and World Bank leadership hope to promote an ambitious reform and fundraising agenda during this year’s spring meetings.

However, the overall picture painted by the WEO is a gloomy one, with global growth forecast to slow in both the short and medium terms. Almost 90% of advanced economies will experience slowing growth this year, while Asia’s emerging markets are expected to see a substantial rise in economic output. India and China are predicted to account for half of all growth, according to IMF Managing Director Kristalina Georgieva.

Low-income countries are expected to suffer a double shock from higher borrowing costs and a decline in demand for their exports, leading to increased poverty and hunger. The IMF expects global inflation to slow to 7% this year, down from 8.7% last year, but still significantly above the 2% target set by the US Federal Reserve and other central banks.

The report assumes that the financial instability sparked by the collapse of Silicon Valley Bank last month has been broadly contained by the “forceful actions” of regulators on both sides of the Atlantic. However, Gourinchas stressed the importance of central banks and policymakers in buttressing financial stability going forward.

While advanced economies are still expected to avoid a recession this year and next, Germany and the UK are the only G7 economies expected to enter recession this year. China is forecast to grow by 5.2% this year, but its economic growth is predicted to slow to 4.5% in 2024 as the impact of its reopening from the Covid-19 pandemic fades. India’s economic forecast has been downgraded from the previous forecast in January, but it is still predicted to grow by 5.9% this year and 6.3% in 2024.

Looking forward, the IMF forecasts that global growth will fall to 3% in 2028, its lowest medium-term forecast since 1990. Slowing population growth and the end of the era of economic catch-up by several countries, including China and South Korea, are expected to contribute to the slowdown, along with concerns about low productivity in many countries.

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