Higher inflation, supply chain chokepoints, and COVID-related shutdowns and worker shortages continue to afflict rich and poor nations, the International Monetary Fund wrote in its latest World Economic Report.
“The global economy enters 2022 in a weaker position than previously expected,„ the fund said in reducing its estimated global growth rate to 4.4% from the 4.9% it projected just three months ago.
The fund said the Federal Reserve Bank’s tighter monetary policy and the failure of the Biden administration’s sweeping $2.2 trillion infrastructure and social policy package were among the reasons it reduced the U.S. growth forecast by 1.2 percentage points to 4%.
In China, which has powered much of the world’s growth in recent years, the IMF pointed to the collapse of the real estate sector and the zero-COVID policy that has restricted travel, shut businesses and reduced consumption. The report reduced the country’s growth forecast by 0.8 percentage points to 4.8%.
The fund emphasized that the forecast was subject to a high level of uncertainty — about the course of COVID, the prospects of climate-related natural disasters, supply-chain disruptions and rising political tensions, particularly around Ukraine. With the pandemic entering its third year, a note of pessimism underlay the report. “Risks overall are to the downside,„ Gita Gopinath, the first managing deputy director, said.
Global economic losses related to the pandemic will total $13.8 trillion by the end of 2024, Gopinath estimated.
Growth in the euro area was revised down by 0.4 percentage points to 3.9%, but for some countries, the drop was much steeper. Clogs in the supply chain, especially those affecting the auto industry, prompted the IMF to estimate that growth in Germany — the largest economy in Europe — would decline by 0.8 percentage points, twice as much as the average of all countries that use the euro.
Although the fund raised its growth expectations for 2023, it emphasized that the small improvement would be insufficient to counteract the slowdown in 2022.
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