The International Monetary Fund logo in Washington, January 10, 2022 (AFP/Stefani Reynolds)
Slowdown in China and the United States, sharp slowdown in global growth. Omicron, inflation and interest rate hikes are all clouds that darken the economic horizon at the start of 2022, the International Monetary Fund warned on Tuesday.
The Washington institution is now counting on an increase in global gross domestic product of 4.4% (-0.5 percentage point compared to October) and after 5.9% last year.
“The Omicron variant has led to new restrictions on mobility in many countries and an increase in labor shortages,” said Gita Gopinath, who has just taken the position of number 2 at a press conference. the institution.
Supply chain disruptions are weighing on the recovery and fueling inflation. They also add to the pressures of strong demand and an increased food and energy crisis.
“Additionally, record debt and rising inflation are limiting the ability of many countries to weather further disruptions,” Gopinath said.
Inflation should rise this year on average in the advanced economies to 3.9% (+1.6 point) and in the emerging and developing economies to 5.9% (+1 point), before slowing down in 2023, detailed the IMF.
Its growth forecasts have been revised down for a large majority of countries. Only one region (Middle East and Central Asia) and a handful of countries of which India, Japan and Argentina are exceptions.
The slowdown in global growth is “essentially” the consequence of less vigorous expansion in the United States and China: respectively +4% (-1.2 points) and +4.8% (-0.8 points) expected this year, says the IMF.
IMF growth forecasts (AFP/Erin CONROY)
In the case of the world’s largest economy, the Fund has removed from its baseline projections the potential benefits of Joe Biden’s “Build Back Better” plan, which calls for some $1.8 trillion in social spending, because it is bogged down in Congress.
Moreover, in the United States, inflation is much higher than expected and supply problems persist.
China is faced with a decline in its real estate sector and weaker domestic consumption linked to the draconian measures aimed at containing the Omicron variant.
In addition, supply disruptions led to lower forecasts elsewhere in the world such as in Germany (+3.8%, -0.8 points), the main economy in the euro zone whose growth projection is now 3 .9% (-0.4 points). France should see its GDP grow by 3.5% (-0.4 points).
The International Monetary Fund in Washington. Photo taken on January 10, 2022 (AFP/Stefani Reynolds)
Overall, the recovery continues nonetheless, but differences between countries persist.
While advanced economies should return to their pre-pandemic trend this year, it is not excluded that several emerging markets and developing economies will suffer a recession in the medium term, notes the Fund.
– The “zero tolerance” strategy in question –
The uncertainty surrounding these projections is great, but IMF economists agree that global growth is under multiple threats.
IMF growth forecasts (AFP/Jonathan WALTER)
Starting with China’s “zero tolerance” strategy of Covid cases which risks exacerbating disruptions to global supply chains. It is also not excluded that the problems of the Chinese real estate sector will spread more widely to the economy.
At the same time, higher inflation in the United States could lead to much more aggressive monetary tightening.
For now, the IMF is assuming three rate hikes this year and three next year. If the Federal Reserve (Fed) were to increase them faster and more strongly, emerging and developing countries, whose debt is denominated in dollars, would be directly affected.
The IMF also notes “the growing geopolitical tensions”. The conflict between Russia and Ukraine could further fuel the rise in energy prices, warned Gita Gopinath while expressing her hope for a peaceful resolution.
Not to mention, the possibility that variants more dangerous than Omicron appear.
The headquarters of the International Monetary Fund (IMF) in Washington, DC, in the United States, on January 19, 2022 (AFP/Daniel SLIM)
In this context, control of the pandemic is essential and the IMF calls once again for widespread vaccinations in developing countries.
Currently, some 70% of the population of rich countries is fully immunized against less than 4% of the population of poor countries.
Despite recovering in 2021 from a historic recession, the IMF has calculated that global GDP may have been cut by $13.8 trillion between 2020 and 2024 due to the pandemic.
© 2022 AFP
Did you like this article ? Share it with your friends with the buttons below.
