On Tuesday, the International Monetary Fund (IMF) released its latest economic outlook, predicting the weakest global growth expectations for the medium term in more than 30 years.
According to the IMF, global growth is expected to be around 3% five years from now, which is the lowest medium-term forecast in an IMF World Economic Outlook since 1990.
The institution expects global growth to be 2.8% this year and 3% in 2024, slightly below the fund’s estimates published in January.
The weaker growth prospects stem from the progress economies like China and South Korea have made in increasing their living standards, as well as slower global labor force growth and geopolitical fragmentation, such as Brexit and Russia’s invasion of Ukraine.
The IMF sees the United States economy expanding by 1.6% this year, the Eurozone growing by 0.8%, and the United Kingdom contracting by 0.3%. Meanwhile, China’s GDP is expected to increase by 5.2% in 2023, India’s by 5.9%, and the Russian economy by 0.7%.
The IMF warned of financial stability concerns amid recent banking sector stresses, which could weaken the real economy through a sharp deterioration in financing conditions and compel central banks to reconsider their policy paths.
The pressures in the banking sector have made the overall economic picture worse in the eyes of the IMF, especially as higher interest rates hurt companies and national governments with high levels of debt.
The IMF expects global headline inflation to drop from 8.7% in 2022 to 7% this year, as energy prices come down. However, core inflation, which excludes volatile food and energy costs, is expected to take longer to fall. In most cases, the IMF does not expect headline inflation to return to its target levels before 2025.
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IMF cuts GDP forecasts, says global economy heading for weakest growth since 1990