The IMF has warned that the global economy is moving in the direction of recording weakest growth since 1990 due to the aggressive rate hikes by the world's major central banks.
"With rising geopolitical tensions and still-high inflation, a robust recovery remains elusive," International Monetary Fund Managing Director Kristalina Georgieva said in Washington. She said that global economic growth will be less than 3 percent this year, which will be the weakest since 1990. To put this in perspective, global economy had recorded an average growth of 3.8 percent in the last two decades.
IMF World Economic Outlook
The IMF chief said steeply rising interest rates are driving up borrowing costs for households and businesses, which in turn is denting economic activity. The IMF's latest World Economic Outlook will be released next week, giving more details of the financial body's assessment of the global economy.
Interestingly, Georgieva said India and China will account for half of global growth in 2023 even as the US and European economies will see a slowing of growth. She said nearly 90 percent of advanced economies will see a decline in growth in 2023.
"This makes it even harder to reduce poverty, heal the economic scars of the Covid crisis and provide new and better opportunities for all," Georgieva said.
Wave After Wave of Setbacks
The IMF chief said the global economy was facing wave after wave of setbacks. "First was Covid, then Russia's invasion of Ukraine, inflation and a cost of living crisis that hit everyone ... So far, we have proven to be resilient climbers. But the path ahead â and especially the path back to robust growth â is rough and foggy, and the ropes that hold us together may be weaker now than they were just a few years ago," she said, according to the Guardian.
In January this year, the International Monetary Fund raised its 2023 global growth outlook slightly due to "surprisingly resilient" demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing abandoned its strict COVID-19 restrictions. The IMF said global growth would still fall to 2.9% in 2023 from 3.4% in 2022, but its latest World Economic Outlook forecasts mark an improvement over an October prediction of 2.7% growth this year with warnings that the world could easily tip into recession.
In its 2023 GDP forecasts made earlier, the IMF said it expected U.S. GDP growth of 1.4%, up from 1.0% predicted in October and following 2.0% growth in 2022. It cited stronger-than-expected consumption and investment in the third quarter of 2022, a robust labor market and strong consumer balance sheets.