Rising Caseloads, Disrupted Recovery, Higher Inflation: New IMF Forecast

UN NEWS—The global economy is entering 2022 in a weaker position than previously expected, the International Monetary Fund (IMF) announced on Tuesday, in an update to their World Economic Outlook (WEO).

The institution now expects the global economy to expand from a 5.9 per cent increase in 2021 to 4.4 per cent this year. The number is half a percentage point lower than predicted in October, reflecting several changes.

As the new Omicron COVID-19 variant spreads, many countries have reimposed restrictions on movement, slowing the economic rebound.

Rising energy prices and supply disruptions have also resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies.

USA And China

The revision is largely a result of forecast markdowns in the two largest economies, the United States and China.

For the US, the institution is removing the Build Back Better fiscal policy package from their calculations, after the legislation stalled in Congress. It is also accounting for the end of stimulus, and continued supply shortages.

Because of all these factors, the economy should grow 4 per cent this year, less 1.2 percentage-points than initially forecasted.

In China, the ongoing retrenchment in the real estate sector, slower-than-expected recovery of private consumption, and pandemic-induced disruptions related to the zero-tolerance COVID-19 policy, have induced a 0.8 percentage-point downgrade.