Global growth is expected to stay unchanged this year at 3.2% and next year slow to 2.7%, IMF Chief Economist Pierre-Olivier Gourinchas said on Tuesday (Oct. 11) in Washington, D.C.
The forecast is 0.2% lower than what was expected in July, with a 25% chance it could fall below 2%, according to the IMF World Economic Outlook Report.
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“The global economy is weakening further and facing a historically fragile environment. The outlook continues to be shaped by three forces. Persistent and broadening inflation, causing a cost-of-living crisis, the Russian invasion of Ukraine and the associated energy crisis, and the economic slowdown in China,” Gourinchas said.
He said the fund is forecasting that one-third of the global economy will contract in 2023 and the three largest economies — the U.S., China, and the Euro region — “will continue to stall.” Risks were calculated around the baseline projections for the first time, he added.
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“We find there is a 25% chance that growth will fall below 2% in 2023. This happened exceedingly rarely in the past and a 10 to 15% chance it will fall below 1%, corresponding to a decline in real output per capita,” Gourinchas said.
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While the cost-of-living crisis ensues, there haven’t been policies handed down to effectively affect change, leaving the risks high at a financially fragile time in history. There is a concern that central banks will ease too early, which would end up triggering an ongoing high inflationary period and “requiring a much larger loss of output later,” Gourinchas added.
“Unfortunately, most risks to the outlook are to the downside,” he said.
