Reporter Cui Puyu
International Monetary Fund (IMF) pointed out in the latest release of the Global Economic Outlook that the global economy continues to face severe challenges due to factors such as the conflict between Russia and Ukraine and the rising inflationary pressure, causing the cost of living crisis.
In the new outlook, the IMF maintains its global economic growth forecast for this year at 3.2%, lowering its growth forecast for 2023 from 2.9% in July to 2.7%, and said that the scope of the economic slowdown in 2023 is very wide, and countries that account for about one-third of the global economy will shrink this year or next year.
"Overall, the economic trauma brought by the new crown epidemic has only partially healed, and this year's impact has reopened it," said Pierre-Olivier Gourinchas, head of the IMF research department. "In short, the worst time has not yet arrived yet. For many people, 2023 will feel like a recession."
The agency pointed out that due to the tightening of the monetary and financial environment, the U.S. economy is expected to grow only 1.6% this year, down 0.7 percentage points from the expectations in July; U.S. economic growth in 2023 is expected to slow to 1%, the same as expected in July.
is in the euro zone . Due to the severe impact of the energy crisis caused by the Russian-Ukrainian conflict, the IMF expects the region's economy to grow only 0.5% next year, down 0.7 percentage points from July's expectations. In addition, the IMF raised its expected economic growth rate in the euro region this year by 0.5 percentage points to 3.1%.
At the same time, the IMF lowered its growth forecast for China's economy this year and next two years by 0.1 and 0.2 percentage points to 3.2% and 4.4% respectively.
The agency expects that India's economy will expand by 6.8% this year, down 0.6 percentage points from previous expectations; next year, the economy will expand by 6.1%, the same as previous expectations.
Despite the economic slowdown, inflation pressure will be more extensive and lasting than previously expected. The IMF expects global inflation to peak at 9.5% this year and fall back to 4.1% in 2024. “Almost everywhere, the rapid rise in prices, especially food and energy prices, has brought great difficulties to families, especially poor families,” Gulinchas said. The
report pointed out that its latest outlook is based on the results of baseline predictions and has downside risks. The agency estimates that there is a 25% chance that global economic growth will drop below the historically low level of 2% next year; if more risks become a reality, global economic growth will drop to 1% or below, with a probability of 10%-15%.
These risks include monetary and fiscal policy mistakes, deterioration of the global financial environment, and the continued strengthening of the US dollar pushing investors to safe assets, continued inflation in amid extreme labor market tensions, and the intensification of the energy crisis caused by the escalation of the Russian-Ukrainian conflict.
Outlook points out that the most direct threat at present and in the future is still increasing price pressure, which will squeeze actual income and destroy the stability of macroeconomic . In order to restore price stability, central banks in various countries have begun to implement radical austerity measures.
IMF said that insufficient tightening will further aggravate inflation, undermine the hard-won credibility of the central bank and weaken inflation expectations, which historically will only increase the ultimate cost of controlling inflation; while excessive tightening may push the global economy into an unnecessary serious recession, and financial markets may also struggle.
In this context, the IMF recommends that first, fiscal policy should not go against the monetary authorities' efforts to reduce inflation, and doing so will only prolong inflation and may cause serious financial instability.
Secondly, the energy crisis, especially in Europe, is not a temporary impact, and the geopolitical adjustment of energy supply after the war will be broad and lasting. Targeted fiscal measures should be used to protect the most vulnerable groups.
Third, fiscal policy can help economies adapt to a more turbulent environment by investing in productivity, such as human capital, digitalization, green energy and supply chain diversification.
IMF also mentioned that the strengthening of the US dollar is a major challenge for many emerging markets. The correct response is to keep prices stable while allowing exchange rate to adjust, leaving precious foreign exchange until the financial situation really deteriorates.
