IMF lowers global growth to 2.7% on recession fears
The International Monetary Fund (IMF) has lowered global GDP growth expectations for 2023 by 20bps (0.2%) to 2.7% from the previous outlook of 2.9% in July 2022.
The IMF maintained its forecast of 3.2 per cent global growth for this year but cut its projection for 2023 to 2.7 per cent,
In the Fund’s latest World Economic Outlook (WEO) report, the projected growth would be the weakest global GDP growth since 2001, excluding the depths of the 2008 financial crisis and the early phase of the Covid pandemic.
According to the Fund, it forecasts a significant slowdown in growth next year as the global economy struggles with high inflation and rapidly rising interest rates, geopolitical turmoil caused by the war in Ukraine and ongoing disruptions caused by COVID-19, particularly in China.
“The three largest economies – the United States, the European Union, and China – will continue to stall. In short, the worst is yet to come, and for many people 2023 will feel like a recession,” says Pierre-Olivier Gourinchas, the IMF’s economic counsellor and head of research.
The Fund also warned that there is a 25-per-cent chance that global growth will fall below 2 per cent next year. This could result from a combination of higher oil prices, further weakening in China’s real estate sector and tighter-than-expected global financial conditions.
The lowered global GDP growth is on the back of fears of recession of the global economy.
According to Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, a global recession next year is likely to wipe away $4 trillion of the world’s GDP.
She asserts the global recession will be fuelled by the slowdown in growth of advanced economies.
“There’s the risk and the real danger of a world recession next year, some of the advanced economies in Europe are slowing.
“We are seeing slowdown in all three key economies of the world, Eurozone because primarily of gas prices shooting up, in China because of COVID disruptions and the volatility of the housing sector which we see as a very significant problem in China dragging down growth. And in the United States still see very strong labour market, but also losing a bit of momentum because interest rates are starting to bite.
“We have calculated that about 1/3 equivalent of the world economy would have at least two consecutive quarters of negative growth this year and next year.
“And that the total amount that would be wiped out by the slowdown of the world economy is going to be $4 trillion. This is the size of Germany GDP which is gone,” she stated.
