IMF raises 2023 global economic growth forecast to 3%— but says ‘it remains weak’

The International Monetary Fund (IMF) has raised its growth forecast for the global economy to 3 percent in 2023 — up from a 2.8 percent projection in April.

This is contained in the Washington-based institution’s latest world economic outlook (WEO) titled ‘Near-Term Resilience, Persistent Challenges (July 2023)’.

The IMF said though the forecast for 2023 was modestly higher than predicted in the April 2023 WEO, it remained weak by historical standards.

“Compared with projections in the April 2023 WEO, growth has been upgraded by 0.2 percentage points for 2023, with no change for 2024,” the report reads.

“The forecast for 2023–24 remains well below the historical (2000–19) annual average of 3.8 percent.

“It is also below the historical average across broad income groups, in overall Gross Domestic Product (GDP) as well as per capita GDP terms. ”

The IMF said advanced economies continued to drive the decline in growth from 2022 to 2023, with weaker manufacturing, as well as idiosyncratic factors, offsetting stronger services activity.

“For advanced economies, the growth slowdown projected for 2023 remained significant, from 2.7 per cent in 2022 to 1.5 per cent in 2023,” the report reads.

“About 93 per cent of advanced economies are projected to have lower growth in 2023, and growth in 2024 among this group of economies is projected to remain at 1.4 per cent.”

The institution said in emerging markets and developing economies, the growth outlook was broadly stable for 2023 and 2024, although with notable shifts across regions.

“For emerging market and developing economies, growth is projected to be broadly stable at 4.0 per cent in 2023 and 4.1 per cent in 2024, with modest revisions of 0.1 percentage point for 2023 and –0.1 percentage point for 2024,” the report reads.

The IMF said global headline inflation was expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024.

“Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward,” it said.

The institution said inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy.

The IMF warned that financial sector turbulence could resume as markets adjust to further policy tightening by central banks.

“China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers,” the report reads.

“Sovereign debt distress could spread to a wider group of economies.”

The IMF, however, said on the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient.

The institution said in most economies, the priority remains achieving sustained disinflation while ensuring financial stability.

“Therefore, central banks should remain focused on restoring price stability and strengthening financial supervision and risk monitoring,” the IMF said.

“Should market strains materialise, countries should provide liquidity promptly while mitigating the possibility of moral hazard.

“They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable.

The international financial institution said improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.

IMF RETAINS NIGERIA’S 2023 GROWTH PROJECTION AT 3.2%

The IMF retained its 3.2 percent forecast for Nigeria’s economic growth in 2023.

The institution, however, said that growth in Nigeria is projected to gradually decline in 2023 and 2024, in line with April WEO projections, primarily due to security issues in the oil sector.

For sub-Saharan Africa, economic growth is expected to decline to 3.5 percent in 2023 before picking up to 4.1 percent in 2024, according to the report.