The global economy is withstanding repeated shocks better than expected and the IMF has raised its growth forecast for 2023, the specter of a recession disappearing for several countries, while China’s reopening gives hope for additional recovery.
The International Monetary Fund (IMF) now expects global growth of 2.9% in 2023, according to its report published on Monday, 0.2 percentage points more than it had expected in October when it published its previous forecast.
“The outlook is less gloomy than our October forecast,” IMF chief economist Pierre-Olivier Gourinchas said during a conference call.
“The coming year will remain difficult,” he warned, but “it could also be a turning point” on the front lines of growth and inflation, the economist said.
The slowdown appears to be less severe than expected in several developed economies, most notably the United States (1.4% growth in 2023, up 0.4 percentage points since October).
But also in Germany and Italy, where the IMF, contrary to its forecast in October, no longer fears a recession. Growth in the euro zone, which is weathering the energy crisis related to the Ukraine conflict better than expected, is therefore expected to be 0.7% or 0.2 points higher than previously.
The other important factor is China’s reopening after abandoning the zero Covid policy. Despite the chaotic management that has led to a sharp rise in Covid cases in the country, this reopening should enable Chinese growth (+5.2% vs. 4.4% forecast three months ago) and give a boost to the global economy .
In addition, inflation, which has risen to very high levels globally, is now slowing and is expected to be lower in 2023 than in 2022 in most countries, the IMF notes in its report.
However, the Washington institution sees it slightly higher this year than previously forecast, at 6.6% versus 6.5% forecast in October. But it should return to below 2021 levels in 2024 (+4.3% vs. +4.7%).
These figures are more optimistic than figures released by the World Bank in mid-January, which indicated a further slowdown in global growth. But that was before the announcement of the end of China’s massive containment measures against Covid-19. The parameters taken into account by the two institutions are also different.
UK recession expected
The three global locomotives – the United States, China and Europe – are thus showing clear signs of resilience for a variety of reasons. And for all advanced economies, still weak growth is expected this year.
One exception, however: the UK is expected to be the only G20 country to experience a recession this year, with GDP contracting by around 0.6% (down 0.9 percentage points from October forecasts).
Conversely, despite the sanctions imposed by the international community since invading Ukraine, Russia could get away with slightly positive growth in 2023 (+0.3%), which is expected to even accelerate in 2024 (+2.1%).
Elsewhere in the world, the expected expansion in Sub-Saharan Africa (+3.8%, almost unchanged) or the Middle East and Central Asia (+3.2%, 0.4 points less than in October) will be much higher than in Latin America and expects Caribbean where it will remain below global growth (+1.8%).
At +1.2% and +1.7%, the growth forecasts for the two Latin American locomotives, Brazil and Mexico, are well below the expectations of the other large emerging countries, particularly China and India (+6.1%).
And global growth of 3.1% is expected for 2024, up from 2023 but with a slight downward revision from October (-0.1 percentage points).
For these two years, however, global growth will “remain weak by historical standards,” said the IMF’s chief economist.