IMF Upgrades Global Economic Outlook This Year

The outlook for the global economy is growing slightly brighter as China eases its zero-COVID policies and the world shows surprising resilience in the face of high inflation, elevated interest rates, and Russia’s ongoing war against Ukraine, Paul Wiseman reported for the Associated Press (AP).

Photo Insert: The IMF, a 190-country lending organization, foresees inflation easing this year as a result of aggressive interest rate hikes by the Federal Reserve and other major central banks.

That’s the view of the International Monetary Fund (IMF), which now expects the world economy to grow 2.9% this year. That forecast is better than the 2.7% expansion for 2023 that the IMF predicted in October, though down from the estimated 3.4% growth in 2022.

The IMF, a 190-country lending organization, foresees inflation easing this year as a result of aggressive interest rate hikes by the Federal Reserve and other major central banks.

Those rate hikes are expected to slow consumer demand which has driven prices higher. Globally, the IMF expects consumer inflation to fall from 8.8% last year to 6.6% in 2023 and 4.3% in 2024.

“Global conditions have improved as inflation pressures started to abate,” the IMF chief economist, Pierre-Olivier Gourinchas, said at a news conference in Singapore. “The road back to a full recovery with sustainable growth, stable prices and progress for all has only started.”

A big factor in the upgrade to global growth was China’s decision late last year to lift anti-virus controls that had kept millions of people at home. The IMF said China’s “recent reopening has paved the way for a faster-than-expected recovery.”

Three weeks ago, the IMF’s sister agency, the World Bank (WB), issued a more downbeat outlook for the global economy. WB slashed its forecast for international growth this year by nearly half — to 1.7% — and warned that the global economy would come “perilously close” to recession, Joe McDonald and Danica Kirka also reported for AP.

The IMF now expects China’s economy — the world’s second-biggest, after the US — to grow 5.2% this year, up from its October forecast of 4.4%. Beijing’s economy eked out growth of just 3% in 2022 — the first year in more than 40, the IMF noted, that China has expanded more slowly than the world as a whole.

But the end of virus restrictions is expected to revive activity in 2023. Together, China and India should account for half of this year’s global growth, while the US and Europe contribute 10%, according to Gourinchas.

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