The global economy is showing signs of slightly better, according to the latest growth data update released Tuesday by the International Monetary Fund (IMF), which now forecasts slightly better growth in 2023 and will remain stable in 2024.
The institution now anticipates global growth of 3% in 2023, compared to 2.8% in its previous estimate in April, and which should remain at the same level in 2024, unchanged from the previous estimate.
“Our projection remains slightly below global growth last year, which was at 3.5% but revised by 0.2 percentage point to 3%. The slowdown is mainly concentrated in advanced economies while growth in emerging markets remains stable at 4%. But that hides significant differences between countries,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told a news conference.
Most of the advanced economies, like the main emerging countries, seem to be performing better than the Fund feared so far, despite a monetary policy that is now restrictive almost everywhere, in order to fight against inflation that remains “stubbornly high”.
On this front too, the IMF expects a slight improvement by the end of the year with inflation which should reach 6.8% worldwide at the end of the year, 0.2 percentage point less than forecast in April.
But inflation that also lasts longer: at the end of 2024, it should still be at 5.2%, while in March the institution expected it to be 0.3 percentage points lower.
“The slowdown we are seeing is largely due to the easing of prices in China, particularly in industry in the second quarter,” Gourinchas told AFP.
The IMF insists on the need to continue monetary tightening in order to bring inflation back to its target, even if this implies an effect on the economy, which has so far been much more resilient than expected, particularly in emerging countries.
US avoids recession
On the side of the G7, Germany should be the only country to experience a recession in 2023. This seems more and more inevitable and a little more marked than expected in April, for the IMF, which now expects a decline of 0.3%, against only 0.1% in April.
Conversely, the other main European economies are resisting better, the forecast for the French economy dropping to 0.8% (“0.1 point compared to April) and that of Italy to 1.1% (”0.4 point) when the Spanish economy even seems to show real signs of good health (2.5% expected, “1 point). For the euro zone as a whole, growth is expected at 0.9% (0.1 point)
As for the United States, the risk of recession, although long announced, now seems to have been ruled out, despite the successive rate hikes since March 2022: the IMF now expects growth of 1.8% for its economy, against 1.6% last April.
The American economy was particularly solid in the first quarter, with growth of 2% at an annualized rate, with a growth overhang for the year which was estimated at 0.9% according to the OECD.
“The job market remains very solid and tight, and inflation, even core inflation, is less important, even if it is not slowing down fast enough. But there are also signs of a slowdown, the reason for our revision for next year”, now expected at just 1%, said Pierre-Olivier Gourinchas to AFP.
As for emerging countries, growth forecasts for the Chinese economy remain unchanged, at 5.2% in 2023 and 4.5% in 2024, despite concerns about the risk of a slowdown, and the consequences of potential deflation, while inflation was zero in June, over one year.
“We are keeping our forecast unchanged, as we believe China can succeed in meeting its growth targets, but this will require support from the authorities, in terms of monetary and fiscal policy, in particular for consumers,” Gourinchas said.
Conversely, major Latin American economies appear to be doing better, benefiting from strong trade performance, a record surplus for Brazil, and investment, with Mexico largely benefiting from the US drive to strengthen supply chains.
These two countries have seen their growth forecasts raised for 2023 respectively by 1.2 points, to 2.1%, and 0.8 points, to 2.6%, compared to the April estimate.
As for Russia, which was to expect a severe recession in 2023, according to the IMF’s initial report published in October, it continues to see its forecasts improve: expected at 0.7% for 2023 in April, it can expect to see its economy grow by 1.5%, the Fund now estimates.