The IMF said that the escalation of the war in Ukraine remains a severe threat to global stability.
The global economy will slow down in 2023 and recover next year. By historical standards, growth will remain weak as the fight against inflation and Russia's war against Ukraine dampen activity.
This is stated in the IMF forecast. The outlook is less bleak than the IMF's October forecast, according to the released materials, but the escalation of the war in Ukraine remains a severe threat to global stability, which could destabilize energy or food markets and further fragment the global economy.
“We slightly raised our growth forecasts for 2022 and 2023. Global growth will slow from 3.4 percent in 2022 to 2.9 percent in 2023 before recovering to 3.1 percent in 2024. In advanced economies, the slowdown will be more pronounced, from 2.7 percent last year to 1.2 percent and 1.4 percent this year and next. Nine out of ten countries will slow down,†the forecast says.
U.S. growth is forecast to slow to 1.4 percent in 2023 as the Federal Reserve’s interest rate hike weighs on the economy.
On the downside:
- China’s recovery could stall amid greater-than-expected economic disruptions from current or future waves of COVID-19 infections or a sharper-than-expected slowdown in the property sector
- Inflation could remain stubbornly high amid continued labor-market tightness and growing wage pressures, requiring tighter monetary policies and a resulting sharper slowdown in activity
- An escalation of the war in Ukraine remains a major threat to global stability that could destabilize energy or food markets and further fragment the global economy
- A sudden repricing in financial markets, for instance in response to adverse inflation surprises, could tighten financial conditions, especially in emerging market and developing economies
On the upside:
- Strong household balance sheets, together with tight labor markets and solid wage growth could help sustain private demand, although potentially complicating the fight against inflation
- Easing supply-chain bottlenecks and labor markets cooling due to falling vacancies could allow for a softer landing, requiring less monetary tightening
