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Global economic recovery is slowing amid widening divergences among sectors, regions: IMF

Addis Ababa, July 26, 2023 (FBC) – The International Monetary Fund (IMF0, in its latest outlook says the Global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent in both 2023 and 2024.

While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), IMF says it remains weak by historical standards.

According to IMF, the rise in central bank policy rates to fight inflation continues to weigh on economic activity.

Accordingly, Global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.

Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy, IMF projected.

It added financial sector turbulence could resume as markets adjust to further policy tightening by central banks.

On the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient, it further projected.

In most economies, the priority remains achieving sustained disinflation while ensuring financial stability. Therefore, central banks should remain focused on restoring price stability and strengthen financial supervision and risk monitoring, IMF has stated.

It added economies should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable. Improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.

 

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