London, Tuesday, 25 January 2022 -
This year's global growth prediction was cut by half a percentage point by the International Monetary Fund.
The IMF said in its World Economic Outlook on Tuesday that global GDP will grow by 4.4 percent year-on-year in 2022, down from a prior estimate of 4.9 percent in its October report, "primarily reflecting projection markdowns in the two largest economies — the US and China."
It emphasized that the global economy started the year in a weaker position than projected, owing to mobility constraints caused by the omicron COVID-19 variation, rising energy prices and supply disruptions, and China's indebted real estate industry.
"The negative impact is expected to fade starting in the second quarter, assuming that the global surge in Omicron infections abates and the virus does not mutate into new variants that require further mobility restrictions," the IMF said, noting that the omicron variant-related measures will weigh on growth in the first quarter of 2022.
Global growth is anticipated to drop to 3.8 percent in 2023, a 0.2 percentage point increase from the prior prediction.
According to the fund, the upward revision is primarily mechanical, with the shocks dragging growth in 2022 dissipating and global output growing a little faster in 2023.
With "a revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary assistance, and ongoing supply constraints," the IMF lowered its growth prediction for the US economy for this year by 1.2 percentage points.
The US economy is expected to expand by 4% in 2022 and 2.6 percent in 2023.
In October 2021, US President Joe Biden introduced the Build Back Better framework for social and climate transformation, describing it as "fiscally prudent" and "completely paid for."
The IMF forecasted 4.8 percent growth this year and 5.2 percent growth next year for China, the world's second-largest economy, but both were revised down.
"In China, pandemic-related interruptions connected to the zero-tolerance COVID-19 policy, as well as prolonged financial hardship among property developers, have resulted in a 0.8 percentage-point decline (for 2022)," the report stated.
The IMF noted that prolonged supply restrictions and coronavirus interruptions resulted in a 0.4 percentage point downward revision in the euro area, with GDP growth anticipated to be 3.9 percent in 2022.
According to the fund, the euro area will grow by 2.5 percent next year.
The IMF predicted that Germany's economy would grow by 3.8 percent this year, down 0.8 percentage points from the previous estimate, owing to the country's vulnerability to supply chain disruptions.
The forecast for emerging markets and developing economies was revised down by 0.3 percentage point to 4.8% in 2022.
Meanwhile, inflation is expected to remain elevated in the near term, averaging 3.9% in advanced economies and 5.9% in emerging market and developing economies in 2022, before subsiding in 2023, the IMF said.
(Researched, written and edited by: The Decision Maker)