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October 10, 2023
IMF presents World Economic Outlook October 2023
Photo: IMF Chief Economist Pierre-Olivier Gourinchas delivers the World Economic Outlook on October 10, 2023. Image provided by & copyright © IMF.
Washington, DC, October 10, 2023 — The International Monetary Fund (IMF) has predicted that global growth will slow to 3% this year and 2.9% in 2024, according to Pierre-Olivier Gourinchas, head of the Fund’s Research Department. In the upcoming World Economic Outlook (WEO) report, the IMF’s Chief Economist said that the slowdown in growth will result from the widening divergence between economies. While the US and large emerging markets are expected to experience substantial growth, China and the Euro-area have received downward revisions. The report also found that headline inflation will decrease from 6.8% this year to 5.7% next year, while core inflation (excluding energy and food prices) will decline, though less significantly.
The quarterly WEO report shows that fears of a widespread recession among the world’s leading economies are receding. The report attributes the divergence between countries to three forces:
- The demand for services, which was strong and supporting service-oriented economies, is softening.
- Countries’ exposure to the energy shock variants (more exposed economies like the Euro-area had a sharper slowdown and experienced more substantial inflation)
- Countries’ differing positions in their tightening cycle
The University of California at Berkeley professor Gourinchas explained that while some advanced economies’ central banks are yet to reach their peak, others, such as Brazil or Chile, have already started to ease. The report warns that while risks are more balanced than last April, they remain tilted to the downside. It points to China’s main risk as growth slows down due to stress in the real estate sector. The report also cautions that commodity prices could become more volatile amid climate and geopolitical shocks and that financial markets could re-price if more significant inflation persists.
The report advises central banks looking to maintain growth and tackle inflation:
- It emphasizes the importance of price stability and calibrating monetary policy for country-specific recovery speeds and disinflation.
- It suggests that in most countries, fiscal policy needs to rebuild buffers by phasing out untargeted subsidies while protecting the vulnerable. It will also aid the fight against inflation
- Governments should focus on reforms that reduce structural impediments to growth, such as increasing labor supply
It will help countries grow faster, facilitate debt reduction, and lower inflation pressures.
Finally, the report highlights the need for multilateral efforts to address global challenges such as climate risks, food and energy security, trade tensions, and geoeconomic fragmentation. The report calls for a robust global financial safety net with a well-resourced IMF.
Source: IMF
|GlobalGiants.Com|
Edited & Posted by the Editor | 3:10 PM | Link to this Post
