By Tom Burnett CFA
On July 26, 2022, the International Monetary Fund (“IMF”) issued a press release with updated forecasts for global GDP growth in 2022 and 2023. All data in this report are sourced from the IMF press release.
The Report is sober and objective and its conclusions point to reduced global growth compared to its April 2022 Report. The baseline forecast for the World economies is GDP growth of 3.2% in 2022, down from 6.1% in 2021. This projection is 0.4% lower than the April forecast. The IMF now sees 2023 growth at 2.9%, down from a forecast of 3.6% in the April Report.
The U.S. economy is now projected to grow at 2.3% in 2022, down from 5.7% in 2021. The April Report had forecast a GDP growth rate of 3.7% for 2022. GDP growth is now expected to grow at just 1.0% in 2023 as tighter monetary policies begin to bite in an attempt to cool down inflation.
The Euro region is expected to grow at 2.6% this year and 1.2% in 2023. The UK forecast is for 3.2% growth this year and just 0.5% in 2023.
In China, GDP growth of 8.1% in 2021 is now expected to fall to 3.3% this year and rebound by 4.6% in 2023. In its April Report, the IMF had projected GDP growth of 4.4% this year.
Surging inflation is a major negative for the world economies. Inflation is now expected to reach 6.6% in the Advanced Economies this year with a 9.5% inflation rate forecast for the emerging market economies. The latest inflation predictions are up 0.9% and 0.8% respectively from the expected levels presented in the April Report. The IMF is also reminding readers that the risks to its outlook are mainly to the downside with Covid-19 outbreaks, ongoing supply chain delays, and the widening impact of the Russian invasion of Ukraine all contributing to a more negative set of conclusions.