The International Monetary Fund (IMF) has revised its global growth forecast, predicting a growth rate of 3% for 2023 and 2024.[0] This is an increase from the previous forecast of 2.8% but represents a slowdown from the 3.5% growth recorded in 2022.[1] The IMF also expects global inflation to ease from 8.7% in 2022 to 6.8% in 2023 and further decline to 5.2% in 2024. However, the IMF warns that persistent challenges could dampen the medium-term outlook.
The IMF attributes the increase in global growth forecast to solid consumer spending in the United States and some other countries. It specifically highlights India's stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment. The IMF projects India's economic growth to reach 6.1% in 2023, a slight upward revision compared to its previous forecast.[2]
While the global economy shows signs of recovery from the effects of the pandemic and geopolitical tensions, the IMF stresses that challenges remain.[3] The IMF's chief economist, Pierre-Olivier Gourinchas, warns that the global economy is not yet out of the woods.
The IMF emphasizes the importance of achieving consistent reduction in inflation rates while ensuring financial stability.[4] It advises central banks to maintain their focus on restoring price stability and strengthening financial supervision.
The report also highlights the risks of inflation remaining high or even rising due to further shocks, such as an intensification of the war in Ukraine or extreme weather-related events. These shocks could trigger more restrictive monetary policy and impact global growth.[5]
The IMF's growth forecast for the United Kingdom remains unchanged, with a projected growth rate of 0.4% for this year.[6] The UK is expected to be the second slowest-growing economy in the G7 group, with only Germany faring worse.[7]
In terms of inflation, the IMF acknowledges that it remains elevated in many countries. It predicts global headline inflation to reach 6.8% in 2023 before easing to 5.2% in 2024. The IMF also points out that core inflation, which excludes food and energy prices, remains stubbornly high in advanced economies.[8]
Despite the improved prospects, the IMF cautions that inflation could remain high or rise further due to various factors, including the intensification of the war in Ukraine or extreme weather events. It emphasizes the need for central banks to carefully manage monetary policy to control inflation and ensure financial stability.
The IMF's forecast for Nigeria's economic growth in 2023 remains at 3.2%.[9] This is unchanged from its previous projection, despite policy reforms implemented by President Bola Tinubu.[10]
The IMF's report also acknowledges the resolution of the US debt ceiling standoff and strong actions taken by authorities to address banking sector problems in the US and Europe.[11] These measures have reduced the immediate risks of financial sector turmoil, but the IMF cautions that the balance of risks to global growth remains tilted to the downside.[12]
The Federal Reserve's decision to raise interest rates is expected to have an impact on the global economy. The IMF predicts that the Fed will raise rates by more than previously assumed, reaching a peak of around 5.6% before reducing them in 2024. The Fed has been raising rates in an effort to combat inflation, which has been running at high levels.
Overall, the IMF's latest report highlights both positive and negative factors influencing global growth and inflation. While there are signs of recovery, persistent challenges and risks remain, and careful management of monetary policy and financial stability will be crucial in the coming years.
0. “IMF lifts 2023 global growth forecast to 3%” Kyodo News Plus, 25 Jul. 2023, https://english.kyodonews.net/news/2023/07/9bba9925fcfb-imf-lifts-2023-global-growth-forecast-to-3.html
1. “LIVE: FTSE and Wall Street rise as IMF lifts global growth forecast to 3%” Yahoo News, 25 Jul. 2023, https://news.yahoo.com/live-markets-blog-uk-economy-ftse-dax-cac-wall-street-stocks-pound-083100727.html
2. “IMF raises India growth forecast to 6.1% for FY24 after strong Q4 showing” Business Today, 25 Jul. 2023, https://www.businesstoday.in/latest/economy/story/imf-raises-india-growth-forecast-to-61-for-fy24-after-strong-q4-showing-391235-2023-07-25
3. “Italy growing more than France and Germany, notes IMF” Decode39 English, 25 Jul. 2023, https://decode39.com/7395/italy-growing-more-france-germany-imf
4. “IMF Chief Sees Growth Headwinds For Major Economies, Warns Battle Against Inflation Not Yet Won” Benzinga, 25 Jul. 2023, https://www.benzinga.com/analyst-ratings/analyst-color/23/07/33377336/imf-chief-sees-growth-headwinds-for-major-economies-warns-battle-against-inflation-
5. “IMF raises India's FY24 GDP growth forecast by 20 basis points to 6.1%” Business Standard, 25 Jul. 2023, https://www.business-standard.com/economy/news/imf-raises-india-growth-forecast-to-6-1-for-fy24-on-strong-growth-momentum-123072500727_1.html
6. “British economy will outperform Germany this year, IMF admits” The Telegraph, 25 Jul. 2023, https://www.telegraph.co.uk/business/2023/07/25/british-economy-outperform-germany-this-year-imf
7. “Travel recovery to boost global economy, says IMF” BBC, 25 Jul. 2023, https://www.bbc.com/news/business-66308279
8. “IMF sees signs global economy is headed in the right direction” MarketWatch, 25 Jul. 2023, https://www.marketwatch.com/story/imf-sees-signs-global-economy-is-headed-in-the-right-direction-bc0e0276
9. “IMF retains Nigeria’s economic growth forecast at 3.2%” Vanguard, 25 Jul. 2023, https://www.vanguardngr.com/2023/07/imf-retains-nigerias-economic-growth-forecast-at-3-2/
10. “Despite Tinubu's reforms, IMF retains 3.2% economic growth forecast for Nigeria” Businessday, 25 Jul. 2023, https://businessday.ng/news/article/despite-tinubus-reforms-imf-retains-3-2-economic-growth-forecast-for-nigeria/
11. “IMF raises India's FY24 GDP growth forecast by 20 bps to 6.1%” Moneycontrol, 25 Jul. 2023, https://www.moneycontrol.com/news/business/economy/imf-raises-indias-fy24-gdp-growth-forecast-by-20-bps-to-6-1-11026291.html
12. “IMF projects Indian economy to grow at 6.1 per cent in 2023” The Indian Express, 25 Jul. 2023, https://indianexpress.com/article/business/economy/imf-projects-indian-economy-to-grow-at-6-1-per-cent-in-2023-8860049/
