September 28, 2022

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International Monetary Fund forecast for global economic growth in 22 and 23

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The International Monetary Fund has said the world economy will enter 2022. With the spread of the new mutant “omigron” strain of the Govit-19 virus, countries are re-imposing restrictions on movement, and disruptions in energy prices and supply chains have led to higher and broader inflation than expected, especially in the United States and many emerging markets and emerging market economies. , Growth opportunities in China have been limited due to the slow recovery in private consumption compared to the ongoing contraction and expectations in the real estate sector in developing countries.

The International Monetary Fund expects a decline of 5.9 percent in 2021 to 4.4 percent in 2022, a half-percentage point reduction for 2022 from expectations for the October 2022 edition of the “World Economic Outlook”. This is largely due to the decline in forecasts for the world’s two largest economies.

The forecast for the United States was cut by 1.2 percentage points, which, based on the revised assumption, excludes “rebuilding optimism” from the core monetary policy framework, early withdrawal of monetary depreciation and continued supply shortfall.

In China, forecasts were cut by 0.8 percentage points due to the epidemic of zero tolerance for infections and continued financial pressure on real estate developers.

According to the fund, global growth is expected to slow to 3.8 percent in 2023. Although this rate represents a 0.2 percentage point increase from the previous forecast, it is largely due to a spontaneous improvement in growth in the second half of 2022. Current barriers will be removed.

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Achieving this forecast depends on the reduction of adverse health effects in most countries by the end of 2022, considering the improvement in vaccine rates worldwide and the increase in the effectiveness of available treatments.

The IMF expects inflation to remain higher than planned in October WEO, with continuous disruptions in supply chains and higher energy prices in 2022.

Given that inflation expectations are at a good level around the target pillar, it is expected that in 2022 its ratio between the supply and demand imbalances and the reflection of monetary policy in key economies will gradually decrease.

The probabilities expected in the underlying situation tend to be counter-improvements. The emergence of new mutations from the Govit-19 virus could prolong the epidemic and cause renewed economic turmoil.

In addition, disruptions in the supply chain, fluctuations in energy prices and the accumulation of wage pressures in specific areas indicate an increase in inflation and uncertainty about policy paths.

As advanced economies raise official interest rates, risks to financial stability and capital inflows into emerging markets and emerging economies, currencies and financial centers are likely to emerge — especially with significant increases in credit levels over the past two years, according to the IMF.

Other global risks may arise as geopolitical tensions rise, and the current climate emergency is more likely to lead to major natural disasters.

As epidemics continue to dominate the global landscape, it is more important than ever to focus on an effective global health strategy.

In this context, the availability of vaccines, diagnostic tests and treatments worldwide is essential to reduce the risk of developing other dangerous mutations in the Covit-19 virus. This requires increasing the production of essential commodities, as well as better distribution systems within countries and greater international distribution.

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In many countries monetary policy should pursue a tighter path to curb inflationary pressures, while monetary policy – which is now operating at a lower capacity than in the early stages of the epidemic – should focus on health and social spending. Support for those severely affected by the crisis.

In this context, international cooperation will be essential to maintain access to liquidity and expedite orderly debt restructuring when needed. Investments in climate policy are still needed to mitigate the risks of catastrophic climate change.

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