The International Monetary Fund (IMF) has issued a cautionary note in its latest World Economic Outlook, shedding light on persistent global economic challenges. The slow and uneven recovery from the COVID-19 pandemic, coupled with ongoing geopolitical uncertainties such as Russia's invasion of Ukraine, is casting a shadow over the world economy.
Despite initial resilience earlier this year, marked by a reopening rebound and a reduction in inflation from peak levels in the previous year, concerns linger. Economic activity continues to fall short of pre-pandemic levels, particularly in emerging market and developing economies, leading to widening divergences among regions.
The complex economic landscape is influenced by various factors, encompassing both long-term consequences and cyclical dynamics. Long-term effects of the pandemic, the ongoing Ukraine conflict, and increasing geoeconomic fragmentation are interwoven with cyclical challenges, including monetary policy tightening, withdrawal of fiscal support, and extreme weather events.
According to the IMF's projections, global growth is expected to slow from 3.5% in 2022 to 3.0% in 2023 and further to 2.9% in 2024. While advanced economies are anticipated to experience a slowdown from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024, there are notable variations within regions. Emerging market and developing economies are projected to witness a modest growth decline, from 4.1% in 2022 to 4.0% in both 2023 and 2024, reflecting challenges in China's property sector.
The United States is projected to maintain a growth of 2.1% in both 2022 and 2023 and 1.5% in 2024. Canada is anticipated to experience a growth rate of 3.4% in 2022, 1.3% in 2023 and 1.6% in 2024, while the European Union faces a mixed scenario, with growth projections ranging from 1.2% to 0.7% in 2024, reflecting diverse economic conditions within the bloc.
Inflation forecasts reveal a steady decline from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024. However, the outlook is revised upward for 2023 and 2024, with a return to target levels not expected until 2025 in most cases.
While risks to the global economic outlook are more balanced compared to six months ago, challenges persist. Concerns include the potential deepening of China's property sector crisis, inflation pressures, climate and geopolitical shocks, and the risk of debt distress in low-income countries.
Policy recommendations underscore the critical role of central banks in restoring price stability and the need for fiscal policymakers to rebuild budgetary room while safeguarding vulnerable populations. Structural reforms, including those aimed at reducing impediments to growth, are highlighted. Efficient multilateral coordination is emphasized for debt resolution and climate change mitigation.
