2023 global growth to be 3% amid pandemic recovery, Ukraine war: IMF

In a recent press briefing marking the July update of the World Economic Outlook report, Pierre-Olivier Gourinchas, the IMF’s chief economist, outlined the current state of the global economy. He noted that it had shown resilience in the first quarter of the year, prompting a slight upward revision in global growth projections for 2023. However, this growth still falls short of historical standards, anticipated to decline in this year and the next. This slowdown is predominantly witnessed in advanced economies.

Gourinchas explained that stronger growth and lower than expected inflation suggest that the global economy is headed in the right direction. Yet, while some adverse risks have moderated, the balance remains tilted to the downside.

“Overall, the outlook shows some improvement since April, and this is worth noting and some of the more extreme risks have declined. For instance, quick and strong action by authorities helped contain banking sector turmoil and reduced the risk of an immediate and broader financial crisis but the balance of risks remains tilted downward. Inflation could remain high or increase, for instance from an intensification of Russia’s war in Ukraine or extreme weather-related events. This could require a further tightening of monetary policy and lead to another bout of financial market volatility. The slowdown in China could worsen, geoeconomic fragmentation could undermine growth further. On the upside, core inflation could fall faster than expected, reducing the need for monetary policy tightening, and allowing for a softer landing,” added Gourinchas.

Gourinchas opined that the main policy priority now is to conquer inflation. Central banks in economies with elevated and persistent core inflation should continue to clearly signal their commitment to reducing inflation.

In his final remarks, Gourinchas underlined the priority for most economies—achieving sustained disinflation whilst ensuring financial stability. He argued for maintaining restrictive monetary policies until underlying inflation shows signs of cooling. He also recommended fiscal tightening in many countries to rebuild fiscal buffers, focusing on supporting the most vulnerable. Gourinchas concluded with a call for urgent global cooperation on issues such as climate policies, international trade, and debt restructuring.

Fibre2Fashion News Desk (NB)