[NEWS] - IMF continues to lower its global growth forecast

Because of inflation and the war in Ukraine, the IMF lowered its forecast for global growth this year to 3.2%.

This is the third downgrade of the IMF’s growth forecast since October 2021. At that time, the IMF expected global GDP to grow by 4.9% this year. But then, this rate continuously dropped, to 4.4% in January and 3.6% in April.

The IMF also lowered its growth outlook for next year, expected to only 2.9%, lower than the 3.6% announced in April.

The IMF warned that the actual outcome could be worse because of a range of risks. It was Europe that abruptly stopped importing gas from Russia; inflation is difficult to control by policy; poor countries struggle to repay their debts due to tight global finances; and China’s economy weakened because of the anti-epidemic and real estate crisis.

In addition, the growing geopolitical divide between the West and Russia and China could hinder global trade and economic cooperation. According to the IMF, in the worst case scenario, global growth could be as little as 2.6% in 2022 and 2% in 2023.

A scene of food market in Mexico (Image: Reuters)

In contrast, the inflation forecast was raised. The standard of living of people around the world is increasingly tightened. Consumer prices are expected to rise 6.6% in advanced economies and 9.5% in emerging and developing markets this year. This growth rate increased by 0.9% and 0.8% respectively compared to the previous forecast.

"Inflation is getting higher and more widespread. Not only with energy and food, it has penetrated into services and goods and is now far beyond the targets of central banks," said Pierre-Olivier Gourinchas - economist "That has reduced purchasing power. In many countries, wages have not kept pace with inflation," said the IMF chief economist.

According to Gourinchas, containing inflation should be a top priority for policymakers, even if it means slowing growth in the short term. "Timely reducing inflation is also creating conditions for stable growth and macroeconomic in the coming years," he said.

The IMF forecasts worldwide inflation will return to near pre-pandemic levels by the end of 2024, after returning to 5.7% by the end of 2023.

Cao Duy