Some 90% of advanced economies are expected to see GDP decline this year. The International Monetary Fund expects global economic growth to slow to less than 3% in 2023.
The global economic slowdown will continue this year, but Asia will remain “a bright spot,” says the International Monetary Fund (IMF).
It estimates that the region as a whole will contribute more than 70% of global growth this year.
In a blog, Krishna Srinivasan, director of the IMF’s Asia and Pacific Department wrote, “China’s recovery is lifting activity around the region. The strongest spillovers to regional growth have been from Chinese demand for investment goods. But this time, we expect the biggest spillover effect will be from China’s increased demand for consumption goods.”
Even so, China’s expansion at 5.2% would be substantially lower than its pre-Covid trend rate.
IMF First Deputy Managing Director Gita Gopinath earlier highlighted that “we don’t have any Chinas anymore that are growing at very high rates.”
“So for the global economy as a whole, we don’t have very large engines of growth. Unless we raise productivity, we are going to struggle with low growth,” Gopinath said on Bloomberg Television.
Meantime, Srinivasan also said that Asia — like other parts of the world — will need to be wary of threats including enduring inflation and leverage and risks in the financial and real estate sectors.
“Policymakers should keep a close eye for financial stress and develop contingency plans,” Srinivasan added.
IMF Director Kristalina Georgieva on Thursday said that the global economy has proven remarkably resilient to multiple shocks, but has yet to overcome a combination of weak growth and sticky inflation.
It also warned on Tuesday that a major new flare-up of banking system turmoil that chokes off lending and sparks a rush into safe-haven assets could slam global growth back to 1%, throwing many economies into recession and putting major stresses on emerging market economies.
India and China will account for half of the global growth, with “some momentum” expected to come from emerging economies, according to IMF Managing Director Kristalina Georgieva.
The IMF chief forecast the world’s economy to grow at less than 3% in 2023, in line with the fund’s January estimate of 2.9%. Georgieva said the pattern would remain over the next five years, since the period of slower economic activity should be prolonged.
She stated that the projections represent the IMF’s “lowest medium-term growth forecast since 1990, and [are] well below the average of 3.8% from the past two decades.”
Some 90% of advanced economies are expected to witness a decline in their growth rates in 2023, Georgieva said.
She also said that low-income nations were being handicapped by sluggish demand for their exports, with their per-capita income growth remaining below that of emerging economies.
According to IMF projections, poverty and hunger, which measurably increased during the Covid-19 pandemic, could still grow further.
Georgieva’s comments come ahead of this week’s spring meetings of the IMF and the World Bank, where policy-makers will convene to discuss the global economy’s most pressing issues.