The recovery of the global economy will be slower this year than previously thought. This is stated by the International Monetary Fund (IMF) in an update of its ‘World Economic Outlook’. The forecast of global economic growth will be revised downwards considerably, from 4.5 percent in 2022 to 3.9 percent.
The rapid spread of the Omikron variant is causing renewed restrictions on mobility in many countries and shortages of deployable workers. Disruptions in global supply chains also remain, which are both depressing production of goods and driving inflation up. Inflation is already higher, due to a sharp pick-up in demand for goods and services last year, and the rapidly rising energy prices.
The downward revision of the IMF is greatest for the United States. Economic growth in 2022 is still strong there, at 4 percent. But a quarter ago, the IMF expected 5.2 percent. The eurozone economy is growing by 3.9 percent, which is 0.4 percentage point less than previously thought. For Germany in particular, the downward revision, at 0.8 percentage point, is significant.
catching up
Gita Gopinath, the chief economist of the IMF until the end of this month, assumes that Omikron will disrupt the economy, especially in the current first quarter. The recovery may continue in the following quarters. The lower than expected economic growth will be partly made up later. The forecast for the world economy in 2023 now assumes economic growth of 2.6 percent, which is just 0.4 percentage points higher than in previous forecasts.
The IMF expects high inflation this year: an average of 3.9 percent in the industrialized countries and 5.9 percent in emerging and developing countries. This inflation is expected to largely subside over the course of the year. Disruption to global production chains is easing and catch-up demand for goods is dampening again. The price increase of oil and gas is also dampening. In addition, central banks are tightening the reins with a tighter interest rate policy. The US central bank will meet on Wednesday evening about this. The IMF expects a US rate hike of 0.75 to 1 percentage point throughout 2022.
Twice a year, in April and October, the IMF publishes a large-scale preview of the global economy. In the meantime, in January and July, forecasts will be revised, but only for major countries and economic blocs. The Netherlands is not included individually in these forecasts.
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