World economic situation: IMF lowers global growth forecast

The International Monetary Fund has lowered its global growth forecast for the coming year to 2.7 percent. The forecasts for Russia, on the other hand, are more favorable than before.

The Russian war of aggression in Ukraine, high inflation and the consequences of the corona pandemic are weighing heavily on the global economy. The International Monetary Fund (IMF) has revised its global growth forecast downwards again and now expects growth of 2.7 percent in the coming year.

In the summer, the IMF had predicted global economic growth of 2.9 percent for 2023. In the euro area, gross domestic product (GDP) is expected to grow by 3.1 percent this year and only by 0.5 percent in the coming year – a significant downgrade compared to the previous forecast of 1.2 percent. According to the Washington-based financial institution, the United States, the world’s largest economy, will grow by 1.6 percent and then by 1.0 percent in 2023.

“The worst is yet to come”

“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” says IMF chief economist Pierre-Olivier Gourinchas, describing the bleak prospects. “As storm clouds gather, policymakers must keep a steady hand.”

The IMF stressed that the forecasts were extremely uncertain. The future development of the global economy depends crucially on monetary policy, the course of the war in Ukraine and possible other disruptions caused by the pandemic – for example in China.

Recession in Russia less severe than previously thought

While the experts lowered their forecasts for most economic areas, they see developments in Russia as being less dramatic than before. According to the IMF, the Russian economy will shrink this year and next, but much less sharply than recently assumed. According to this, Russia’s gross domestic product will fall by 3.4 percent in 2022 and by another 2.3 percent in 2023.

The IMF thus significantly increased its estimates from July by 2.6 percentage points and 1.2 percentage points respectively. In 2021, before the attack on Ukraine and the sanctions imposed by the West on Moscow, the Russian economy had grown by 4.7 percent.