IMF Raises Global Growth Forecast On China Reopening

Despite the global fight against inflation and the war in Ukraine, the International Monetary Fund upgraded its world economic growth projections as the full reopening of China is set to safeguard the recovery.

The global growth outlook for 2023 was revised up by 0.2 percentage points to 2.9 percent, the IMF said in its World Economic Outlook Update, released Tuesday.

Nonetheless, this was weaker than an estimated 3.4 percent growth in 2022, which was also revised up by 0.2 percentage point as there were positive surprises and greater-than-expected resilience in numerous economies.

The lender projected economic growth to improve moderately to 3.1 percent next year.

While fight against inflation as well as Russia’s war in Ukraine will continue to weigh on global economic activity this year, the reopening of China after the lockdowns will pave the way for a faster-than-expected recovery.

Global inflation is expected to ease to 6.6 percent this year and 4.3 percent in 2024. Still inflation remains above pre-pandemic levels of about 3.5 percent, the lender noted.

The IMF observed that the balance of risks remains tilted to the downside, but adverse risks have moderated since the October 2022 World Economic Outlook.

In the United States, growth is expected to weaken from 2.0 percent in 2022 to 1.4 percent in 2023 and 1.0 percent in 2024.

Growth in Eurozone is projected to bottom out at 0.7 percent this year before improving to 1.6 percent in 2024.

Citing tighter fiscal and monetary policies and financial conditions, UK’s GDP outlook for this year was downgraded by 0.9 percentage point to -0.6 percent.

Growth in Japan is seen improving to 1.8 percent in 2023, underpinned by continued monetary and fiscal policy support. However, growth is expected to decline to 0.9 percent next year as the effects of past stimulus dissipate.

China GDP is projected to rise to 5.2 percent in 2023, reflecting rapidly improving mobility, but to weaken to 4.5 percent next year before settling at below 4 percent over the medium term.

India’s economy is set to grow to 6.1 percent in 2023 before picking up to 6.8 percent in 2024, with resilient domestic demand despite external headwinds.

Following the path of global demand, the lender said world trade growth is seen declining in 2023 to 2.4 percent, despite an easing of supply bottlenecks, before rising to 3.4 percent in 2024.

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