The International Monetary Fund (IMF) has slightly increased its global GDP growth forecast for 2023, thanks to resilient economic activity in the first quarter. However, the IMF also issued a warning that the global economy still faces challenges.
According to the World Economic Outlook (WEO) released by the IMF, global growth is expected to decline from an estimated 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024. The 2023 growth projection has been upgraded by 0.2 percentage points compared to the April forecast, while there is no change for 2024.
Despite this modest improvement, the growth remains weak when compared to historical standards, largely due to central banks raising policy rates to combat inflation, which is hampering economic activity.
When looking at major economies, the IMF projects a significant slowdown in advanced economies’ growth for 2023, with a revision of 0.2 percentage points upward from the April 2023 forecast. The United States’ growth is expected to slow from 2.1 per cent in 2022 to 1.8 per cent in 2023 and further decline to 1.0 per cent in 2024.
The euro area is projected to experience a decline from 3.5 per cent in 2022 to 0.9 per cent in 2023 before rebounding to 1.5 per cent in 2024. In the UK, growth is expected to decrease from 4.1 per cent in 2022 to 0.4 per cent in 2023, then rise to 1.0 per cent in 2024.
This projection for 2023 is an upward revision of 0.7 percentage points due to stronger-than-expected consumption and investment, influenced by factors like falling energy prices, reduced post-Brexit uncertainty, and a resilient financial sector.
For other major economies, China’s growth forecast remains unchanged at 5.2 per cent for 2023 and 4.5 per cent for 2024. India’s growth projection for 2023 has been revised upward by 0.2 percentage points, reaching 6.1 per cent, driven by stronger domestic investment in the fourth quarter of 2022.
Regarding global trade, the report indicates a decline in growth from 5.2 per cent in 2022 to 2.0 per cent in 2023 before rebounding to 3.7 per cent in 2024. This decline is due to changes in global demand and a shift in trade composition toward domestic services, as well as the impact of US dollar appreciation and increasing trade barriers.
Furthermore, global headline inflation is expected to decrease from 8.7 per cent in 2022 to 6.8 per cent in 2023 and 5.2 per cent in 2024, though it remains high with variations across different economies and inflation measures.
The IMF has also revised its growth forecast for the Middle East and Central Asia region, projecting a decline from 5.4 per cent in 2022 to 2.5 per cent in 2023.
This downward revision is mainly due to a significant slowdown in Saudi Arabia’s GDP growth, which is expected to drop from 8.7 per cent in 2022 to 1.9 per cent in 2023. The downgrade for Saudi Arabia is attributed to production cuts announced in April and June as part of the OPEC+ agreement, although strong non-oil GDP growth is still supported by private investments, including “giga-projects” implementation.