As the International Monetary Fund and the World Bank Group are holding their annual meetings in Washington DC this week to discuss the numerous challenges faced by the world economy these days, the IMF has once again cut its forecast of global economic growth for next year. The latest revision marks the fourth downward correction this year, signaling waning optimism amid a perfect storm of global crises.
“The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China,” Pierre-Olivier Gourinchas writes in the foreword to the latest World Economic Outlook. The IMF now projects global GDP to grow 3.2 percent this year and 2.7 percent in 2023 – the latter marking a 0.2 percentage point downgrade from the July forecast. With more than a third of the global economy expected to contract this year or next, “2023 will feel like a recession” to many people, the IMF writes, adding that “the worst is still to come.”
Aside from its destabilizing effects on the global economy, Russia’s invasion of Ukraine has also exacerbated the global inflation crisis by driving up energy and food prices around the world. The response has been aggressive monetary tightening, which will eventually slow down consumer demand and investment to reign in inflation. The IMF expects global inflation to peak at 8.8 percent this year, but to remain elevated longer than previously anticipated at 6.5 percent in 2023 and 4.1 percent in 2024.
This chart shows IMF growth projections for the global economy made in 2022.
