The International Monetary Fund (IMF) on Monday projected that global growth will fall from 3.4% in 2022 to 2.9% this year amid a rise in central bank rates to curb inflation and the Russia-Ukraine war. Despite the low-growth prediction, the UN financial agency noted that China and India will be “major engines of growth this year.”
The Report
While the projection for the global economy in 2023 is expected to remain dim, growth will rebound to 3.1% next year. The report — World Economic Outlook — notes that despite some adverse risks having moderated since October 2022, the following events could hamper global economic recovery:
- Severe health outcomes in China
- Escalation of the Russia-Ukraine war
- Tighter global financing costs worsening debt distress
- Adverse impact of inflation
- Further geopolitical fragmentation
Moreover, the IMF predicts that 90% of advanced economies are projected to see a decline in growth this year. In the US, growth will fall from 2% in 2022 to 1.4% and 1% in 2023 and 2024, respectively. The UK will witness a 0.9% decline in growth compared to last year.
India and China
Noting that economic growth in developing countries will rise from 3.9% in 2022 to 4% this year, the IMF said the growth in China will increase to 5.2% in 2023, reflecting the country’s “rapidly improving mobility” due to the removal of Zero Covid measures.
While it projected growth in India to decline from 6.8% last year to 6.1% in 2023, the report expresses confidence that growth will return to 6.8% in 2024 due to “resilient domestic demand.”
Senior IMF official Pierre-Olivier Gourinchas said separately that “China and India will be the major engines of growth this year.” “India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a tenth for the US and euro area combined.”