IMF cuts global growth outlook for 2022, US and China recovery wanes
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On January 10, 2022, the International Monetary Fund seal can be seen at the World Bank Headquarters (R), Washington DC.
AFP | AFP | Getty Images
International Monetary Fund’s global growth forecast has been downgraded for the year due to higher Covid-19 and supply chain disruptions, as well as economic recovery being hampered by rising inflation.
In its delayed World Economic Outlook report, published Tuesday, the IMF said it expects global gross domestic product to weaken from 5.9% in 2021 to 4.4% in 2022 — with this year’s figure being half a percentage point lower than previously estimated.
The report stated that “the global economy enters 2022 with a weaker situation than originally expected”. It also highlighted “downside surprises”, such as the appearance of the omicron Covid variant and market volatility since October’s forecast.
Growth markdowns in two of the largest economies, the U.S.A and China, are the main drivers for the revised outlook.
As the Federal Reserve withdraws its monetary stimulus and supply chain disruptions continue to weigh on the economy, the U.S. will grow at 4.0% by 2022. This is 1.2 percentage point lower than originally forecast. After the failure of passage of the original bill, President Biden’s Build Back Better fiscal policy package was removed from the updated projection.
China is expected to increase 4.8% in 2018, a decrease of 0.8 percent from previous estimates. This was due to disruptions resulting from its zero-Covid program and “projected financial distress” among property developers.
The inflation focus
Other places, rising Covid cases and rising energy prices have impacted global growth, particularly in Brazil, Canada, and Mexico.
Higher inflation was predicted to continue longer than anticipated. However, the IMF stated that this should decrease later in the year as “supply-demand imbalances diminish in 2022 and monetary intervention in major economies responds.”
It raised its 2023 forecast for growth by 0.2 percent to 3.8%. It warned, however, that this estimate does not exclude the possibility of the creation of a new Covid type and stated any pick-up would depend on fair global access to health care.
The forecast assumes that adverse outcomes in health will decline to low levels for most countries by the end of 2022. This is assuming global vaccination rates increase and more effective therapies.
The report stated, “The importance of a successful global health strategy has never been more important.”
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