IMF raises global growth forecast this year to 3 percent

Growth expected to decline in the Middle East and Central Asia region
IMF raises global growth forecast this year to 3 percent
Global growth

The International Monetary Fund (IMF) expects global growth to pick up slightly in 2023 and remain stable in 2024, according to updated data released Tuesday.

The IMF raised its level of optimism about the global economy, expecting it to grow by 3 percent in 2023, a slight increase from its previous forecast in April (2.8 percent), and to remain at the same level in 2024, unchanged from the previous estimate.

“Our forecast for this year is improving and inflation is falling, which is good news, but we are not yet safe and growth remains weak, especially due to the marked slowdown in advanced economies,” IMF chief economist Pierre-Olivier Gourinchas told AFP.

Read: IMF positive outlook on UAE economy

Most advanced economies, such as the most prominent emerging countries, appear to be performing better than the IMF had so far expected, despite monetary policy being constrained almost everywhere in order to combat inflation.

The IMF predicted a slight improvement by the end of the year with inflation anticipated to be 6.8 percent worldwide at the end of the year, 0.2 percentage points lower than the April forecast. Inflation at the end of 2024 is predicted to be at 5.2 percent.

“The slowdown we are seeing is largely due to lower prices in China, particularly in the industry in the second quarter,” Gourinchas said.

IMF stressed the need for continued monetary restraint in order to bring inflation back to its target, the impact on an economy that had hitherto been much more resilient than expected, especially in emerging countries.

Global growth: Group of Seven

For the G7, Germany is only expected to experience a recession in 2023. This appears increasingly inevitable and sharper than estimated in April by the IMF, which now expects a 0.3 percent decline from 0.1 percent in April.

In contrast, other major European economies showed signs of better resilience, with growth forecasts for the French economy rising to 0.8 percent (+0.1 points compared to April) and the Italian economy to 1.1 percent (+0.4 points). The Spanish economy is showing a clear recovery with 2.5 percent (+1 pip).

For the US, the risk of a prolonged recession now appears to have been ruled out, despite successive rate increases since March 2022. The International Monetary Fund’s forecast for its economic growth estimated it from 1.6 percent in April to 1.8 percent now.

The U.S. economy was particularly strong in the first quarter, with 2 percent year-on-year growth and growth for the year estimated by the OECD stood at 0.9 percent.

“The labor market remains very solid and inflation is lower, but there are signs of a slowdown, which is why our review for next year is expected to be 1 percent,” Gourinchas noted.

As for emerging countries, China’s economic growth outlook remains unchanged at 5.2 percent in 2023 and 4.5 percent in 2024, despite fears of a slowdown and the potential consequences of a possible recession lasting more than a year, while inflation was non-existent in June.

Global growth: Latin America

Conversely, Latin America’s major economies appear to be improving, benefiting from excellent trade performances, Brazil’s record surplus and investments, while Mexico has benefited greatly from America’s desire to strengthen supply chains.

The IMF’s growth forecast for these two countries for 2023 improved by 1.2 points to 2.1 percent and 0.8 points to 2.6 percent, respectively, compared to April’s forecast.

As for Russia, which the IMF predicted in a preliminary report published in October that it will experience a severe recession in 2023, its outlook improved after it predicted in April that the Russian economy will grow by 0.7 percent for 2023, to 1.5 percent now.

Global growth: Middle East

Growth in the Middle East and Central Asia region is expected to slow from 5.4 percent in 2022 to 2.5 percent in 2023, down 0.4 percent.

The report cut its forecast for Saudi economic growth for the current year to 1.9 percent from 3.1 percent in its previous forecast in April, which it attributed to “production cuts announced in April and June,” but noted that private investment in Saudi Arabia, including from “major projects,” continues to support the country’s strong non-oil GDP growth.

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