The International Monetary Fund (IMF) has revised its assessment of the global economic outlook under “Inflation at the highest level in a low-growth environment.” In other words, the effects of the global crisis have still not been fully overcome everywhere in the world.
Negative sentiment continues:
According to the report, the central bank’s interest rate hikes to combat inflation and Russia’s invasion of Ukraine negatively impact economic activity.
According to the study, the goal of most economies in times of crisis, when the cost of living rises, is to bring inflation down sustainably. The impact of restrictive monetary conditions and limited development potential on financial and debt stability should be mitigated by implementing macroprudential measures and improving the debt restructuring framework.
What Can Be Done
According to the study, fiscal support should be targeted to those most affected by rising food and energy prices, while support to the broader population should be reduced.
While concerns about rising inflation affect pricing, it is increasingly unclear when central banks will stop raising interest rates.
In yesterday’s oral session, Atlanta Fed President Raphael Bostic stated that interest rates should be raised above 5% to prevent inflation from rising again.
According to the report, the rapid expansion of Covid-19 in China disrupted growth in 2022, but the recent rebalancing has paved the way for a faster recovery than expected.
What Can Be Done Was Discussed In July
While the probability of a 50 basis point rate hike at this month’s meeting is above 30 percent, a 75 basis point rate hike in July seems likely.
Experts stressed that rising inflationary pressures had increased asset price volatility and the likelihood of a 25 basis point Fed rate hike in July. According to the experts, investors will closely follow today’s speeches by Fed members, and the data could potentially increase market volatility.
According to IMF Report, Projected Growth This Year Is Below Annual Average
The global economy is expected to grow 3.4 percent in 2022, slowing to 2.9 percent in 2023 and rising to 3.1 percent in 2024.
In a report released in October 2022, the IMF projects that the global economy will grow by 3.2 percent in 2022, 2.7 percent in 2023 and 3.2 percent in 2024.
According to the report, the growth forecast for this year has been revised upward, but the growth rate is still below the historical average of 3.8 percent.
Inflation is expected to fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024, but still above the pre-pandemic level of 3.5 percent.
Unchanged Expectations For The Dollar And The Euro Area
The IMF report also includes revised growth forecasts for individual countries. For example, the growth forecast for the U.S. economy in 2023 was raised from 1 percent to 1.4 percent. The growth forecast for the U.S. economy in 2024 was lowered from 1.2 percent to 1 percent.
This year’s growth forecast for the eurozone economy was raised from 0.5 percent to 0.7 percent, while the forecast for 2024 was lowered from 1.8 percent to 1.6 percent.
The growth forecast for the German economy, previously expected to contract by 0.3 percent this year, was raised to 0.1 percent, while the growth forecast for the Italian economy, previously expected to contract by 0.2 percent this year, was raised to 0.6 percent.
The 2023 growth forecast for France was left unchanged at 0.7 percent, while the growth forecast for Spain was lowered from 1.2 percent to 1.1 percent.
In addition, the growth forecasts for Germany, Italy and Spain for next year were lowered from 1.5 percent to 1.4 percent, from 1.3 percent to 0.9 percent and from 2.6 percent to 2.4 percent, respectively. The growth forecast for the French economy remained unchanged at 1.6 percent for next year.
According to the reports, the United Kingdom’s GDP, expected to increase by 0.3 percent this year, will decline by 0.6 percent by 2023. The growth forecast for the UK economy in 2024 was raised from 0.6 percent to 0.9 percent.
For the group of industrialized countries, the growth forecast for 2023 was raised from 1.1 percent to 1.2 percent, while for 2024, it was lowered from 1.6 percent to 1.4 percent.
IMF is Growth Forecasts for China and India
The growth forecast for China was raised to 5.2%.
The report, which also included growth forecasts for emerging and developing economies, raised China’s annual economic growth forecast to 5.2% from 4.4%. China’s GDP growth forecast for 2024 remained unchanged at 4.5 percent.
The growth forecast for the Indian economy was maintained at 6.1 percent this year and 6.8 percent next year.
The Russian economy, which is expected to contract by 2.3 percent this year, is forecast to grow by 0.3 percent in 2023. The growth forecast for the Russian economy in 2024 was raised from 1.5 percent to 2.1 percent.
With these adjustments, growth forecasts for emerging and developing economies were raised from 3.7 percent to 4 percent in 2023 and from 4.3 percent to 4.2 percent in 2024.
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