IMF Projects Global Economic Growth, Inflation At 3.0% And 6.8% Respectively

The International Monetary Fund (IMF) says global economic growth is projected at 3.0% while inflation is projected at 6.8% in 2023.

In its World Economic Outlook, the IMF said the same figure is projected for economic growth next year.

“Global growth is projected to fall from an estimated 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards.”

This is tied to the incessant rise in monetary policy rates by countries to rein in inflation.

“The rise in central bank policy rates to fight inflation continues to weigh on economic activity,” it said noting that the balance of risks to global growth remains tilted to the downside.

Global Inflation
For global inflation, the Fund projects a fall from 8.7% in 2022 to 6.8 per cent in 2023 and 5.2 per cent in 2024.

“Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.”

It warns that inflation could rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy.

“Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies,” it added.

That notwithstanding, it noted that inflation could fall faster than expected.

Recommendation
With the uncertainties about inflation, the Fund has directed Central Banks to remain focused on restoring price stability and strengthening financial supervision and risk monitoring.

“Should market strains materialize, countries should provide liquidity promptly while mitigating the possibility of moral hazard. They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable. Improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.”