MARRAKESH (AFP) – The International Monetary Fund (IMF) kept its 2023 global growth forecast unchanged yesterday but warned that the economy is “limping along” as inflation remains high and the outlooks for China and Germany were downgraded.
The IMF’s updated World Economic Outlook still sees growth of 3.0 per cent for this year but it cut its forecast for 2024 to 2.9 per cent, down 0.1 percentage points from its July report.
“The economy continues to recover from the pandemic and war in Ukraine, showing remarkable resilience,” said the IMF’s chief economist Pierre-Olivier Gourinchas.
“Yet growth remains slow and uneven. The global economy is limping along, not sprinting,” he said at a news conference during the institution’s annual meetings in Morocco.
Inflation, which has fallen sharply since last year, is predicted to remain elevated at 6.9 per cent this year, up slightly from July, and 5.8 per cent in 2024, up 0.6 percentage points.
Central banks have raised interest rates sharply in efforts to contain inflation.
The move could have knock-on effects on growth, but the IMF warned central banks against easing the monetary tightening too soon, adding that it still expects the global economy to have a “soft landing” — a slowdown that avoids recession.
“The news on inflation is encouraging, but we’re not quite there yet,” Gourinchas said.
Meanwhile, Gourinchas pointed to “important divergences” between countries.
The United States (US) is performing better than other major economies, with the IMF upgrading its growth forecast from 1.8 per cent to 2.1 per cent for this year. It will slow to 1.5 per cent next year, but it is 0.5-percentage-points higher than in the IMF’s July outlook.
By contrast, China’s outlook for the next two years was lowered under the weight of a real estate crisis threatening the world’s second biggest economy.
The Chinese economy is now expected to grow by 5.0 per cent this year – down from 5.2 per cent previously – and slow further to 4.2 per cent in 2024, down from 4.5 per cent.
Chinese authorities need to take “very forceful, and very sizable action… to really bring back confidence in the (property) sector,” Gourinchas told AFP in an interview.
In the press conference, Gourinchas said Chinese policymakers “have room” to ease monetary policy and provide fiscal support. “These are measures we would encourage the authorities to take,” he added.
GERMAN RECESSION
The picture is also gloomy in Germany, with the IMF seeing a deeper recession in Europe’s biggest economy – the only G7 country to have a contraction. The German economy is expected to shrink by 0.5 per cent this year – instead of 0.3 per cent previously – and grow by 0.9 per cent in 2024 instead of 1.3 per cent.
The wider eurozone is forecast to grow by just 0.7 per cent this year, down 0.2 percentage points from July, and by a reduced 1.2 per cent in 2024.
Gourinchas told AFP that the eurozone was hit harder than the US by the rise in energy prices following the war in Ukraine, as the region is an importer.
“The US is not an energy importer, so when the price of energy goes up, if anything, they become richer,” he said.
He also pointed to more resilient US consumer spending, a lesser impact from interest rate hikes and higher government spending.
Among other countries, the IMF sharply raised Japan’s economic outlook to 2.0 per cent for this year, pointing to “pent-up demand, a surge in inbound tourism, and accommodative policies, as well as by a rebound in auto exports”.
India’s growth forecast was lifted for this year to 6.3 per cent, in line with its unchanged outlook for 2024.
The growth outlook for the Middle East and Central Asia was cut by half a percentage point to 2.0 per cent for this year, dragged down by a lower forecast for oil-rich Saudi Arabia.
Gourinchas said it was “too early” to assess the impact that the conflict between Israel and Hamas could have on the Middle East economy.
In sub-Saharan Africa, the outlook has worsened slightly, with growth expected to reach 3.3 per cent, down 0.2 percentage points amid a projected slowdown in the Nigerian economy.
Russia’s economy has remained more resilient than many economists expected.
The IMF sharply raised its growth forecast once more to 2.2 per cent for this year, up 0.7 percentage points from July. Its growth outlook for next year was cut slightly to 1.1 per cent.
