IMF slashes growth view for year to 4.4 percent

WASHINGTON－The International Monetary Fund on Tuesday projected the global economy to grow by 4.4 percent in 2022, down by 0.5 percentage point from October's forecast, according to an update to its World Economic Outlook report.

Growth will be slow as economies grapple with supply disruptions, higher inflation, record debt and persistent uncertainty, IMF First Deputy Managing Director Gita Gopinath told a virtual press briefing.

"The rapid spread of the Omicron variant has led to renewed mobility restrictions in many countries and increased labor shortages," Gopinath said.

She added that while Omicron will weigh on activity in the first quarter of 2022, this effect will fade starting in the second quarter.

"The emergence of the Omicron variant in late November threatens to set back this tentative path to recovery", the report said.

Petya Koeva Brooks, deputy director of the IMF's research department, told Xinhua News Agency in an interview on Tuesday that the assumption is that while there may be localized lockdowns and with things "kind of flaring up", the level of hospitalizations and the number of deaths are going to be at much lower levels by the end of the year.

"Which is another way of saying that we're essentially moving to a situation where in one shape and form, we are living with the virus," Brooks said. "So when it comes to the economic impact…we expect that effect to not be as pronounced in the latter part of this year."

Downside risks

However, Brooks noted there are downside risks to the IMF's assumption regarding the pandemic. "So we cannot preclude the possibility of a new variant and then that having an implication for economic activity," she said.

Supply disruptions still weigh on activity and are contributing to higher inflation, Gopinath noted. Supply-demand imbalances are assumed to decline over 2022 based on industry expectations of improved supply, as demand gradually rebalances from goods to services, and extraordinary policy support is withdrawn.

The IMF has revised up 2022 inflation forecasts for both advanced and emerging markets and developing economies, with elevated price pressures expected to persist for longer. Assuming inflation expectations remain anchored, inflation is expected to subside in 2023.

According to the latest report, global trade will moderate in 2022 and 2023, in line with the overall pace of expansion and cross-border services trade－particularly tourism－is expected to remain subdued.

The IMF projects that global trade is on track to grow by 6 percent this year, down by 0.7 percentage point from October's forecast. Global trade will expand by 4.9 percent next year, according to the projection.

Xinhua - Agencies