The International Monetary Fund (IMF) declared on Sunday that the outlook for the global economy is much more gloomy than it was predicted to be last month, citing a steady slide in purchasing manager surveys in recent months. According to a blog written for the G20 leaders’ summit in Indonesia, the prospects for global economic growth are facing a distinct combination of obstacles, including the Russian invasion of Ukraine, interest rate increases to control inflation, and lingering pandemic effects like China’s lockdowns and disruptions in supply chains.
In its most recent World Economic Outlook, published last month, the IMF revised its earlier prediction of 2.9% global growth for next year to 2.7%. It is anticipated that during some time this year or next, economies of nations that account for more than a third of global output will contract. The IMF blog issued a warning, adding, “Moreover, as we highlight in our most recent report prepared for the Group of Twenty, recent high-frequency data show that the picture is gloomier.”
Policymakers should continue to place a high priority on limiting inflation because it is causing a cost-of-living crisis that disproportionately affects low-income and vulnerable populations. This is true despite mounting signs of a global downturn. The macroeconomic policy climate is unusually unpredictable, as our G20 report emphasizes, it stated. “However, to reduce inflation and manage debt risks, additional fiscal and monetary tightening is likely needed in many countries, and we do anticipate further tightening in many G20 nations in the months ahead. But these moves will nonetheless have an impact on economic activity, particularly in interest-sensitive industries like housing, it added.
It was noted that the enormous challenges facing the world economy and the deterioration of economic indicators point to more difficulties in the future. However, the world can move toward stronger and more inclusive growth with careful policy action and collaborative multilateral efforts.