WASHINGTON, USA
The global economy is entering 2022 “in a weaker position than previously expected,” the International Monetary Fund warned on Tuesday, as it downgraded its global growth outlook largely due to clouds gathering over the recoveries in the United States and China.
The
IMF’s latest World Economic Outlook calls for the global growth to downshift
from 5.9 percent in 2021 to 4.4 percent this year. The 2022 forecast is half a
percentage point lower than the Fund’s October outlook and largely reflects
forecast markdowns for the world’s two largest economies.
The
Fund saw the US economy growing 4.0 percent this year. That was 1.2 percentage
points lower than its October call and reflected the failure to pass President
Joe Biden’s Build Back Better spending plan, the Federal Reserve’s unwinding of
pandemic stimulus measures, and continuing supply shortages that are driving
inflation.
The IMF sees China’s economy growing 4.8 percent this year – 0.8 percentage points lower than its October forecast – thanks to the country’s business-sapping, zero-tolerance COVID-19 policy, and ongoing stress in its heavily indebted property sector.
Inflation
has proven to be more persistent than the IMF bargained for back in October,
thanks to continuing supply chain disruptions and high energy prices. The Fund
sees those persisting this year, but gradually decreasing if inflation
expectations remain anchored, “supply-demand imbalances wane in 2022” and
central banks like the US Federal Reserve raise borrowing costs to rein in
rising prices.
But
as always, there are risks to the outlook, said the IMF, such as new COVID-19
variants that could prolong the pandemic and introduce fresh economic
disruptions. Supply chain snarls, volatile energy prices, and localised wage
pressures could create more uncertainty around inflation, said the Fund, while
interest rate increases in advanced economies such as the US could negatively
affect emerging and developing economies.
“Rising
geopolitical tensions and social unrest also pose risks to the outlook,” IMF
First Deputy Managing Director Gita Gopinath told reporters during a virtual
news conference on Tuesday.
Gopinath
said that total economic losses from the pandemic are expected to be close to
$13.8 trillion through 2024. She also highlighted a recurring theme the Fund
has raised since the global economy started its long slog back to pre-pandemic
health, namely the widening recovery gap between richer and poorer nations.
“Even
as recoveries continue, the troubling divergence in prospects across countries
persists,” said Gopinath, noting that advanced economies are expected to return
to their pre-pandemic trends this year, while several emerging markets and
developing economies “are projected to have sizeable output losses into the
medium term.”
The
IMF downgraded its outlook for Brazil and Mexico, Latin America’s biggest
economies, as well as South Africa.
While
the overall trend for the globe is a recovery downshift, the IMF upgraded the
outlook for India. It also sees the Middle East and North Africa getting a
performance boost this year from higher energy prices.
“The
MENA region is one where we actually have an upgrade for this year, so we’re
expecting growth to be 4.4 which is an upgrade of point three,” Petya Koeva
Brooks, deputy director at the IMF’s research department told reporters. “The
main reason for that is the improved prospects for growth in oil exporters,
which is again linked directly to the higher oil prices.”
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