IMF lowers global economic growth forecast with global divergences

The International Monetary Fund (IMF) on Tuesday downgraded its 2023 global growth estimates slightly given growing global divergences and little margin for policy error.

Global growth is forecast to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024, a 0.1 percentage point downgrade for 2024 from IMF’s July projections, according to its latest World Economic Outlook.

The 2023-2024 growth forecast remains well below the historical standards, with the annual average growth seen at 3.8 percent in 2000-2019.

“Several headwinds to global growth subsided earlier this year,” the IMF said while noting persistent challenges, such as a slowdown in manufacturing, a slow catch-up in services, and tighter monetary policy adopted by global central banks.

The slowdown is more pronounced in advanced economies than in emerging markets and developing economies, as policy tightening in advanced economies starts to bite, the IMF said.

The expected slowdown for advanced economies is from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024, according to the report.

Within advanced economies, the U.S. showed ‘stronger-than-expected’ momentum, with resilient consumption and investment, while euro area activity was weaker than expected.

Meanwhile, emerging market economies proved quite resilient. The global lender predicted a modest decline in growth from 4.1 percent in 2022 to 4.0 percent in both 2023 and 2024. Now, the IMF expects China to grow 5 percent this year and 4.2 percent in 2024.

“Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled,” Pierre-Olivier Gourinchas, IMF chief economist, wrote in a blog post.

“The global economy is limping along,” he added.

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