The International Monetary Fund on Tuesday downgraded its 2022 global growth forecast to 4.4% in its World Economic Outlook report. The IMF said it expects global gross domestic product to grow 0.5% less than previously estimated. The revision is largely due to lower growth in the world’s two largest economies: the U.S. and China. Rising Covid-19 cases, supply chain disruptions and higher inflation have hampered the economic recovery.
“The global economy enters 2022 in a weaker position than previously expected,” the report noted, highlighting “downside surprises” such as the emergence of the omicron Covid variant, and subsequent market volatility, since its October forecast.
IMF World Economic Outlook Highlights
- Cuts US 2022 growth by 1.2% to 4% from 5.2% previous. Growth was 5.6% in 2021
- Sees US growth of 2.6% in 2023
- IMF reduction in US reflects new assumptions minus Build Back Better legislation, earlier withdrawal of monetary accommodation and continued supply chain shortages
- Sees China economy growing by 4.8% in 2022 vs earlier forecast of 5.6%. Sees 2023 growth at 5.2%
- Revises UK GDP to 4.7% in 2022 (versus5.0%) and 2.3% in 2023 (versus 1.9%)
- Cuts Euro area growth to 3.9% in 2022 (down -0.4%) and 2.5% in 2023
- Inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy responds
- The IMF said higher inflation is set to persist for longer than previously anticipated, but added that it should ease later this year, “as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.”
Looking ahead, the report upgraded its 2023 growth forecast by 0.2 percentage points to 3.8%. However, it warned that the estimate precluded the emergence of a new Covid variant, and said any pickup would be dependent on equitable global access to vaccines and health care.
“The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective,” it said.
“The emphasis on an effective global health strategy is more salient than ever,” it added.