The IMF yesterday raised its global growth outlook for this year slightly due to “surprisingly resilient” demand in Europe and the US, an easing of energy costs and the reopening of China’s economy after Beijing abandoned its strict COVID-19 restrictions.
The IMF said global growth would still fall to 2.9 percent this year from 3.4 percent last year, but its latest World Economic Outlook forecasts mark an improvement from an October prediction of 2.7 percent growth this year with warnings that the world could easily tip into recession.
IMF chief economist Pierre-Olivier Gourinchas said that recession risks had subsided, and central banks are making progress in controlling inflation, but more work is needed to curb prices, and new disruptions could come from further escalation of the war in Ukraine and China’s battle against COVID-19.
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“We have to sort of be prepared to expect the unexpected [this year], but it could well represent a turning point, with growth bottoming out and then inflation declining,” Gourinchas told reporters.
The IMF expects US GDP growth of 1.4 percent for this year, up from 1 percent predicted in October last year and following 2 percent growth last year.
The eurozone has made similar gains, with growth for the bloc this year now forecast at 0.7 percent, versus 0.5 percent in the October outlook, and following 3.5 percent growth last year, the IMF said.
Europe has adapted to higher energy costs more quickly than expected, and an easing of energy prices has helped the region, it said.
The UK is the only major advanced economy the IMF predicted could fall into recession this year, with a 0.6 percent decline in GDP as households struggle with rising living costs, including for energy and mortgages.
The IMF revised China’s growth outlook sharply higher for this year, to 5.2 percent from 4.4 percent in the October forecast after COVID-19 lockdown policies last year slashed China’s growth rate to 3 percent — a pace below the global average for the first time in more than 40 years.
However, the boost from renewed mobility for Chinese people is expected to be short-lived.
At the same time, India’s outlook remains robust, with unchanged forecasts of a 6.1 percent growth.
Together, the two Asian powerhouse economies would supply more than 50 percent of global growth this year, Gourinchas said.
He said that China’s reopening would put some upward pressure on commodity prices, but “on balance, I think we view the reopening of China as a benefit to the global economy” as it will help ease production bottlenecks that have worsened inflation and by creating more demand from Chinese households.
Even with China’s reopening, the IMF is predicting a decline in oil prices this year and next year due to lower global growth compared with last year.
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