KATHMANDU: International Monetary Fund (IMF) has forecast that global growth to slow from 6 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. Releasing a report- ‘World Economic Outlook: Countering the Cost-of-Living Crisis’ on Tuesday the IMF states that higher inflation, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic are responsponsible for the slowing growth. “The global economy is experiencing a number of turbulent challenges. The global economy’s future health rests critically on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions,” the report says.
Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.
The report further says that upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging markets and developing economies. “More energy and food price shocks might cause inflation to persist for longer. Global tightening in financing conditions could trigger widespread emerging market debt distress. Halting gas supplies by Russia could depress output in Europe,” notes the report, adding that a resurgence of COVID-19 or new global health scares might further stunt growth.
The report cautions that a worsening of China’s property sector crisis could spill over to the domestic banking sector and weigh heavily on the country’s growth, with negative cross-border effects, and states that geopolitical fragmentation could impede trade and capital flows, further hindering climate policy cooperation. Fiscal policy’s priority is the protection of vulnerable groups through targeted near-term support to alleviate the burden of the cost-of-living crisis felt across the globe. “But its overall stance should remain sufficiently tight to keep monetary policy on target,” the report says.