IMF Issues Growth Warning as it Lowers 2023 Forecast

A man carrying bags of vegetables walk through an underpass in Beijing on April 11, 2023. (AFP)
A man carrying bags of vegetables walk through an underpass in Beijing on April 11, 2023. (AFP)
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IMF Issues Growth Warning as it Lowers 2023 Forecast

A man carrying bags of vegetables walk through an underpass in Beijing on April 11, 2023. (AFP)
A man carrying bags of vegetables walk through an underpass in Beijing on April 11, 2023. (AFP)

The International Monetary Fund slightly lowered its outlook for the global economy on Tuesday, while predicting that most countries will avoid a recession this year despite economic worries and geopolitical tension.

Concerns over high inflation, rising geopolitical tension and financial stability all hang over the updated forecasts, with the impact of the war in Ukraine continuing to dampen growth and drive up consumer prices in many countries.

Persistent economic concerns could overshadow plans by the IMF and World Bank to promote an ambitious reform and fundraising agenda at this year's spring meetings.

In its World Economic Outlook (WEO) report, the IMF predicts the global economy will grow by 2.8 percent this year and three percent in 2024, a decline of 0.1 percentage point from its forecasts in January.

The IMF's forecasts for the United States were slightly rosier: the world's largest economy was expected to grow by 1.6 percent in 2023, marginally higher than the previous forecast.

"The global economy remains on track for a gradual recovery from the pandemic and Russia's war in Ukraine," IMF chief economist Pierre-Olivier Gourinchas told a press conference Tuesday, adding that "the massive and synchronized tightening of monetary policy by most central banks" had begun to bring inflation back towards its target.

"At the same time, serious financial stability related downside risks have emerged," he said, referring to the banking turmoil unleashed last month after the dramatic collapse of Californian high-tech lender Silicon Valley Bank.

Advanced economies drag down growth

The overall picture painted by the WEO is gloomy, with global growth forecast to slow in both the short and medium terms.

Close to 90 percent of advanced economies will experience slowing growth this year, while Asia's emerging markets are expected to see a substantial rise in economic output -- with India and China predicted to account for half of all growth, IMF managing director Kristalina Georgieva said last week.

Low-income countries, meanwhile, are expected to suffer a double shock from higher borrowing costs due to high interest rates, and a decline in demand for their exports, Georgieva said. This could worsen poverty and hunger.

The IMF expects global inflation to slow to seven percent this year, down from 8.7 percent last year, according to the WEO forecasts. It is then expected to fall to 4.9 percent in 2024.

Both 2023 and 2024 inflation forecasts were revised upwards, and remain significantly above the two percent target set by the US Federal Reserve and other central banks around the world, suggesting policymakers have a long way to go before inflation is brought back under control.

Germany on brink of recession

While the picture is one of slowing growth, almost all advanced economies are still expected to avoid a recession this year and next.

Alongside growth in the United States, the Euro area is also forecast to grow by 0.8 percent this year, and 1.4 percent next year -- led by Spain, which will see 1.5 percent growth in 2023 and two percent growth in 2024.

But the area's biggest economy, Germany, is now expected to contract by 0.1 percent this year, joining the United Kingdom, the only other G7 country expected to enter recession in 2023.

The picture is more positive among emerging market economies, with China forecast to grow by 5.2 percent this year. But its growth is predicted to slow to 4.5 percent in 2024, as the impact of its reopening from the Covid-19 pandemic fades.

India's economic forecast has been downgraded compared to January, but it is still predicted to grow by 5.9 percent this year and 6.3 percent in 2024, providing some much-needed stimulus to the global economy.

And Russia is now expected to grow by 0.7 percent this year, up 0.3 percentage point on January's forecast, despite its invasion of Ukraine.

Poor productivity saps outlook

Looking forward, the IMF forecasts that global growth will fall to three percent in 2028, its lowest medium-term forecast since the 1990s.

Slowing population growth and the end of the era of economic catch-up by several countries including China and South Korea are a large part of the expected slowdown, as are concerns about low productivity in many countries, according to Daniel Leigh, who heads the World Economic Studies division in the IMF's Research Department.

"A lot of the low hanging fruit was picked," he told reporters ahead of the publication of the World Economic Outlook.

"On top of that now, with the geopolitical tensions and fragmentation, this is going to also weigh on growth," he said.



China to US: 'Market Has Spoken' after Tariffs Spur Selloff

US and Chinese flags and a label with the word "34% Tariffs" are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
US and Chinese flags and a label with the word "34% Tariffs" are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
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China to US: 'Market Has Spoken' after Tariffs Spur Selloff

US and Chinese flags and a label with the word "34% Tariffs" are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
US and Chinese flags and a label with the word "34% Tariffs" are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration/File Photo

China said on Saturday "the market has spoken" in rejecting US President Donald Trump's tariffs, and called on Washington for "equal-footed consultation" after global markets plunged in reaction to the trade levies that drew Chinese retaliation.

Several Chinese commerce associations in industries from healthcare and textiles to electronics also issued statements on Saturday calling for unity in exploring alternative markets and saying the tariffs would worsen inflation in the United States.

Hong Kong Financial Secretary Paul Chan told public broadcaster RTHK, however, Hong Kong would not impose separate countermeasures, citing the need for the city to remain "free and open".

"The market has spoken," Chinese foreign ministry spokesperson Guo Jiakun said in a post on Facebook on Saturday. He also posted a picture capturing Friday's falls on US markets, Reuters reported.

Trump introduced additional 34% tariffs on Chinese goods as part of steep levies imposed on most US trade partners, bringing the total duties on China this year to 54%.

Trump also closed a trade loophole that had allowed low-value packages from China to enter the US duty-free.

This prompted retaliation from China on Friday, including extra levies of 34% on all US goods and export curbs on some rare earths, escalating the trade war between the world's two largest economies.

Global stock markets plummeted following China's retaliation and Trump's comments on Friday that he would not change course, extending sharp losses that followed Trump's initial tariff announcement earlier in the week and marking the biggest losses since the pandemic. For the week, the S&P 500 was down 9%.

"Now is the time for the US to stop doing the wrong things and resolve the differences with trading partners through equal-footed consultation," Guo wrote in English.

China's chamber of commerce, representing traders in food products, called on "China's food and agricultural products import and export industry to unite and strengthen cooperation to jointly explore domestic and foreign markets".

Hong Kong's Chan said it strongly opposes Trump's actions and would persist in being "free and open".

"Allowing a free flow of capital and acting as a free port are our advantages, and this will not change," Chan told public broadcaster RTHK.

"The rules-based multilateral trading system is our core," he said.