By Andrea Shalal

WASHINGTON (Reuters] – On Tuesday, the International Monetary Fund reduced its forecasts for America, China, and the world economy. They also warned that there were additional risks from uncertainty around the pandemic as well, inflation, disruptions to supply and tightening U.S. monetary policy.

Gita Gopinath (the IMF’s No. 1 official) said that global growth will be 4.4% this year, which is 0.5 percentage points lower than the previous forecasts. This was primarily due to downgrades of the United States, China, and other factors. In a blog, Gita Gopinath (the IMF’s No. 2) wrote about the most recent update to the World Economic Outlook.

According to the IMF, the Omicron variant’s rapid expansion had resulted in increased mobility restrictions and labor shortages in many countries. Inflation was also being fuelled by supply disruptions. According to the IMF, Omicron would have a negative impact on the economy in the first quarter but will improve as it is associated with less serious illnesses.

The IMF predicts that global growth will slow to 3.8% by 2023. This is a slight increase from October’s forecast. However, it stated that the IMF believes the growth was mostly mechanical as current growth drags have dissipated in the second half 2022.

Globally, economic losses from the pandemic are now estimated to be $13.8 trillion to 2024, in contrast to the $12.5 trillion forecast by Gopinath (previously the IMF chief economist).

Because of the failure by President Joe Biden of passing a huge social and climate spending bill, tightening U.S. monetary policies and continuing supply shortages, IMF’s forecast of U.S. economic growth was reduced by 1.2 percentage points.

After expanding at 5.6% in 2021, the U.S. Economy is forecast to expand by 4% between 2022 and 2023. Growth will then slow to 2.6% in 2023 according to IMF.

China was downgraded by 0.8 percentage points to 4.8% in 2022, following 8.1% growth 2021. In 2023, growth will be slightly higher to 5.2%.

According to the IMF, this was due to pandemic-induced disturbances in China’s Zero-Tolerance COVID-19 Policy and financial stress from property developers.

In addition, the IMF cut its Euro zone forecasts by 0.4 percentage points to 3.9% for 2022. It also predicted that there will be a slowdown in growth to 2.5% 2023.

Both the Fund’s 2022 growth projections for Brazil (and Mexico) were reduced by 1.2 percent each. These are Latin America’s most important economies. Brazil now sees a 0.3% growth and Mexico 2.8% this year, with the rest of the region expected to increase 2.4%. This is 0.6 percentage points below the prior forecast.

Japan and India had their forecasts slightly upgraded.

IMF advised that the new COVID-19 variations could extend the pandemic and incite renewed economic disruptions. Additionally, supply chain disruptions, volatility of energy prices and wage pressures pose further risk.

They revised their 2022 inflation forecasts both for developed and developing countries. In addition, they said that high price pressures are more likely to last longer than expected due to continued supply chain disruptions.

According to the report, inflation is expected to be 3.9% for advanced countries and 5.9% for emerging and developing markets in 2022. Then it will subside in 2023 thanks in part to moderated fuel and food price growth.

The IMF stated that while economies are still recovering from the shock caused by the pandemics, there was a wide variation in the rate of recovery between poorer and rich countries.

The IMF stated that while advanced economies will likely return to their pre-pandemic trends this year, many emerging and developing markets face large output losses.

Gopinath stated in her blog that seventy-million more people lived in extreme poverty following the pandemic. This set back progress on poverty reduction for several years.

According to the IMF, it is crucial to provide worldwide access to vaccines and tests to lower the risks of dangerous COVID-19 variants. However, many countries will need to increase interest rates in order to limit inflation.

Gopinath pointed out that 60% of countries with low incomes were at risk of falling into debt. He urged the Group of 20 members to accelerate debt restructuring and stop paying debt service while these restructurings are in progress.