Outlook for the global economy is getting “gloomier” – IMF

The International Monetary Fund believes that the prospects for the global economy look gloomier than predicted. Among the main reasons they named the war in Ukraine, low growth in China, measures of central banks, high inflation and other, Reuters reported.

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Causes of the global economy slowdown

Speaking about the deteriorating prospects for the global economy, the IMF relies on the constant deterioration in surveys of managers in recent months. The Fund notes that the dynamics are caused by several factors.

  • Tightening of monetary policy to overcome inflation.
  • Weak growth in China.
  • Prolonged supply disruptions and threats to food security due to the Russian war against Ukraine.

Recent surveys of managers, which measure manufacturing and service sector activity, signal weakness in most major G20 economies. Economic activity is declining and inflation keeps being high.

Political environment is unusually uncertain – IMF

The IMF also noted that the current political environment is “unusually uncertain”.

The challenges facing the global economy are enormous, and the weakening economic performance points to further challenges ahead, the IMF stated.

Last month, the IMF lowered its global economic growth (GDP) forecast for 2023 from 2.9% to 2.7%.

Energy crisis

The IMF believes that the deepening energy crisis in Europe will seriously damage economic growth and increase inflation. At the same time, prolonged high inflation may lead to a more significant than expected increase in interest rates and further tightening of the global financial environment. It also increases the risks of a debt crisis for vulnerable economies.

Inflation increase across the world

  • Inflation in Argentina is approaching 100%, which is why real wages in the country are seriously lagging behind the rate of price growth.
  • Inflation has also shaken one of the most stable and wealthy countries – Switzerland. It recorded the largest decline in real wages over the past 80 years. 
  • Inflation in the United States reached about 8%.

As for Ukraine, suffering from the Russian invasion, according to the results of October, consumer inflation in annual terms accelerated to 26.6% (from 24.6% in September).

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