International│Cooling of the world economy

CESCE, Country Risk

The International Monetary Fund (IMF) has revised downwards growth forecasts in the latest edition of the World Economic Outlook (WEO), published last week.

The institution estimates that the world GDP It will increase by 3,2% in 2022, almost half a point below estimates made in April. By 2023, it is expected that the growth of the world economy will slow down to 2,7%, the weakest figure since 2001 (except for the year of the Great Recession -2009-, and the year of the outbreak of covid-19 -2020-). . The cooling of the economy will be widespread and will affect, to a greater or lesser extent, the vast majority of countries. The slowdown is mainly due to the distortion caused by the conflict in Ukraine, the effects of the covid-zero policy of China, and the tightening of monetary policy to contain inflationary pressures. The economic advisor of the IMF, Pierre-Olivier Gourinchas, warned that “the worst is yet to come and for many people 2023 will feel like a recession.”

The institution estimates that at least a third of economies will register two consecutive quarters of economic contraction between 2022 and 2023. The Fund also recognizes that inflation will remain at high values ​​longer than initially expected.

Specifically, it estimates that the price variation of the world economy will be 8,8% in 2022, almost double compared to last year's data. By 2023, a moderation is expected to reach 6,5%, as a result of the sluggish consumption. In this context, the institution highlights the challenging scenario from the perspective of monetary politics, given that insufficient tightening would consolidate inflationary pressures and, on the contrary, an excessive rate hike could cause a intense economic recession. In regional terms, the slowdown will be more intense in developed economies. Specifically, it predicts that economic growth in the United States will be 1,6% in 2022 and 1% in 2023.

For its part, it estimates that the GDP of the eurozone will increase by 3,1% in the current year and will slow down next year to 0,5%, weighed down by the energy crisis that has triggered the conflict in Ukraine. Gourinchas He noted that “the winter of 2022 will be difficult for Europe, but 2023 will probably be worse,” due to the geopolitical readjustment of energy supplies. In the case of China, the economic cooling has materialized this year, with an increase of 3,2%, very far from the 8% registered last year, as a consequence of the drastic zero-covid policy and the problems it suffers. the real estate sector.

Source: CESCE