The International Monetary Fund (IMF) has warned that global economic growth will slow markedly in 2023, even though it continued to recover from the Covid-19 pandemic and the shocks from the Russia-Ukraine war.
In its World Economic Outlook (WEO) report today, the IMF said global growth will slow from 3.5% in 2022 to 3% this year and 2.9% next year, a 0.1 percentage point downgrade for 2024 from July projections.
The IMF said advanced economies were expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024, amid stronger-than-expected US momentum but weaker-than-expected growth in the euro area.
Emerging market and developing economies are projected to have growth modestly decline, from 4.1% in 2022 to 4.0% in both 2023 and 2024, with a downward revision of 0.1 percentage point in 2024, reflecting the property sector crisis in China.
IMF chief economist Pierre-Olivier Gourinchas said the projections for global economic growth at 3% for 2023 remained below the historical average of 3.8%.
Gourinchas said forecasts for global growth over the medium term, at 3.1%, are at their lowest in decades, and prospects for countries to catch up to higher living standards are weak.
“The global economy continues to recover from the pandemic and Russia's invasion of Ukraine, showing remarkable resilience. Yet, growth remains slow and uneven. The global economy is limping along, not sprinting,” Gourinchas said.
“Under our baseline forecast, growth will slow from 3.5% last year to 3% this year, and this remains well below historical averages.”
Gourinchas said important divergences were appearing, with the slow down more pronounced in advanced economies and in emerging markets and developing economies. He said that among advanced economies, the US has been revised up with resilient consumption and investment, while the euro area has been revised down as tighter monetary policy and the energy crisis took a toll.
“There is divergence also among emerging markets and developing economies, with China facing growing headwinds, while Brazil, India and Russia are revised up,” Gourinchas said.
“The news on inflation is encouraging, but we're not quite there yet. Headline inflation continues to decelerate. Core inflation, excluding food and energy prices, is also projected to decline, but more gradually. However, all in all, most countries are not expected to return to inflation target until 2025.”