IMF Lifts Global Growth Forecasts

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Facts

• The International Monetary Fund (IMF) released its latest World Economic Outlook report on Monday, revising its previous global growth projections upward by 0.2%.¹
• According to the report, global output is forecast to slow to 2.9% in 2023, down from 3.4% last year, as central banks continue to raise interest rates to fight inflation, but a global recession would likely be avoided due to resilient customers and the reopening of China's economy.²
• Britain is the only member of the G7 group of leading developed nations expected to see a recession this year, with the IMF now calculating a 0.6 percentage point contraction.³
• This comes as 'surprisingly resilient' consumption and investment in the third quarter of 2022, a robust labor market, and stronger consumer balance sheets were reported in the US and Eurozone.³
• Yet, the slowdown may be more pronounced in advanced economies, with China and India being projected to account for 50% of global growth.⁴
• The IMF also expects that over 80% of countries will face lower headline inflation this year compared to 2022, estimating an annual average rate of 6.6% in 2023 and 4.3% the next year.⁵

Sources: ¹Wall Street Journal, ²New York Times, ³Al Jazeera, ⁴Axios and ⁵CNBC.

Narratives

• Narrative A, as provided by Washington Post. This year will certainly be challenging, but it may well represent the turning point of the global economy. Though uncertainty still looms, confidence that a global recession can be avoided has improved as the world's three main economic engines – China, Europe, and the US – have outperformed expectations and averted some predicted problems so far.
• Narrative B, as provided by Economist. Indeed, there's reason to be cheerful about the world economy as inflation has eased in the US, energy prices have plunged in Europe, and China has gotten rid of its destructive 'zero-COVID' policy. It's too early, however, to dismiss the risk of a global recession as overheated labor markets and the energy crisis still endure.

Predictions