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Global economy gradually recovering, but not yet out of the woods: IMF

Growth is projected to fall from an estimated 3.5% in 2022 to 3.0% in 2023 and 2024, modestly higher than predicted in April

The International Monetary Fund (IMF) on Tuesday slightly revised upward global GDP growth forecast for 2023 on the back of resilient activity in the first quarter but warned that it is still in the woods.

According to World Economic Outlook (WEO) released by IMF on Tuesday, global growth is projected to fall from an estimated 3.5 per cent in 2022 to 3.0 per cent in 2023 and 2024. Compared with projections in April, growth has been upgraded by 0.2 percentage points for 2023, with no change for 2024.

"While the forecast for 2023 is modestly higher than predicted in April, it remains weak by historical standards. The rise in central bank policy rates to fight inflation continues to weigh on economic activity," said the global lender.

Major economies

IMF projected a significant slowdown in advanced economies' growth for 2023 from 2.7 per cent in 2022 to 1.5 per cent in 2023, with a 0.2 percentage point upward revision from the April 2023 forecast.

Growth in the US is projected to slow from 2.1 per cent in 2022 to 1.8 per cent in 2023, then slow further to 1.0 per cent in 2024. For 2023, the forecast has been revised upward by 0.2 percentage points on account of resilient consumption growth in the first quarter. Growth in the euro area is projected to fall from 3.5 per cent in 2022 to 0.9 per cent in 2023 before rising to 1.5 per cent in 2024. While growth in the UK is projected to decline from 4.1 per cent in 2022 to 0.4 per cent in 2023, then rise to 1.0 per cent in 2024. This is an upward revision of 0.7 percentage points for 2023, reflecting stronger-than-expected consumption and investment from the confidence effects of falling energy prices, lower post-Brexit uncertainty and a resilient financial sector.

Among other major economies, the forecast for China was unchanged at 5.2 per cent for 2023 and 4.5 per cent for 2024. India's growth is projected at 6.1 per cent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment.

Global trade

Meanwhile, the report said world trade growth is expected to decline from 5.2 per cent in 2022 to 2.0 per cent in 2023 before rising to 3.7 per cent in 2024, well below the 2000–19 average of 4.9 per cent. The decline in 2023 reflects not only the path of global demand but also shifts in its composition toward domestic services, lagged effects of US dollar appreciation—which slows trade owing to the widespread invoicing of products in US dollars—and rising trade barriers.

Global headline inflation is expected to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023 and 5.2 per cent in 2024.

"Inflation is easing in most countries but remains high, with divergences across economies and inflation measures," it said.

Saudi growth plunges by 6.8%

However, it slashed the Mena region's growth forecast for 2023 and 2024 due to a major drop in Saudi GDP growth.

Growth in the Middle East and Central Asia is projected to decline from 5.4 per cent in 2022 to 2.5 per cent in 2023, with a downward revision of 0.4 percentage points, mainly attributable to a steeper-than-expected growth slowdown in Saudi Arabia, from 8.7 per cent in 2022 to 1.9 per cent in 2023, a negative revision of 1.2 percentage points.

"The downgrade for Saudi Arabia for 2023 reflects production cuts announced in April and June in line with an agreement through Opec+, whereas private investment, including from "giga-project" implementation, continues to support strong non-oil GDP growth," the IMF report said.

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