Global economy to fall by 2.8% in 2023, IMF forecasts

From Abubakar Yunusa Abuja

The International Monetary Fund, IMF, says global growth will bottom out at 2.8 per cent in 2023 before rising modestly to 3.0 per cent in 2024.

This is according to the IMF’s latest World Economic Outlook, WEO, Update Report for April 2023:

“A Rocky Recovery”, released on Tuesday at the World Bank Group/ IMF 2023 Spring Meetings.

The report said the baseline forecast is for growth to fall from 3.4 per cent in 2022 to 2.8 per cent in 2023, before settling at 3.0 per cent in 2024.

It said advanced economies were expected to see pronounced growth slowdown, from 2.7 per cent in 2022 to 1.3 per cent in 2023.

“This year’s economic slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom.

“Growth is expected to fall to 0.8 per cent and -0.3 per cent this year before rebounding to 1.4 and 1 per cent respectively.

“By contrast, despite a 0.5 percentage point downward revision, many emerging markets and developing economies are picking up, with year-end to year-end growth accelerating to 4.5 per cent in 2023 from 2.8 per cent in 2022.”

The report showed that economic growth in Sub-Saharan Africa is projected to remain moderate at 3.6 per cent in 2023 before picking to 4.2 per cent in 2024.

It revealed that economic growth in Nigeria is projected at 3.2 per cent in 2023 and 3.0 in 2024.

The report said global inflation would fall, though more slowly than initially anticipated, from 8.7 per cent last year to 7 per cent in 2023 and 4.9 per cent in 2024.

“Inflation is slowly falling, but economic growth remains historically low and financial risks have risen.”

It said the global economy’s gradual recovery from both the pandemic and Russia’s invasion of Ukraine remained on track.

“China’s reopened economy is rebounding strongly. Supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding.

“Simultaneously, the massive and synchronised tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets.

The report said more than ever, policymakers needed a steady hand and clear communication.

“With financial instability contained, monetary policy should remain focused on bringing inflation down, but stand ready to quickly adjust to financial developments.

“Fiscal policy can also play an active role. By cooling off economic activity, tighter fiscal policy would support monetary policy, allowing real interest rates to return faster to a low natural level.

“Regulators and supervisors should also act now to ensure that remaining financial fragilities do not morph into a full-blown crisis by strengthening oversight and actively managing market strains.

“For emerging markets and developing economies, this also means ensuring proper access to the Global Financial Safety Net. This includes the IMF’s precautionary arrangement.” accelerate the green transition, and stronger mechanisms to promote cooperation and risk-sharing among stakeholders.

“For example, improved policy, regulatory, technological and information frameworks and financial toolkits could support private capital mobilisation, and broaden the investor base, especially in emerging and developing economies.”

It said participants identified areas of work within their respective mandates to be accelerated on the road to COP28, including making the investment environment more conducive to climate finance.

The statement said other areas included identifying specific obstacles that impede private sector climate finance and using innovative financing instruments to scale up private investment in emerging and developing economies.

“Others are proposing reforms to help strengthen countries’ macroeconomic and balance of payments stability by reducing risks associated with climate change.”

It said the participants agreed to continue to collaborate between now and COP28 in Dubai and beyond to define and implement specific measures toward shared goals.

“By working together, we can help scale up climate finance so the trillions of dollars that are needed become available as fast as possible.

“We must find pathways to accelerate the partnership between public and private finance to meet climate goals.”

The IMF Managing Director was quoted as saying, “The impacts of global warming are already destroying lives and livelihoods.

“So we need a step change in our financing approach to redirect trillions of dollars towards meeting the climate challenge.

“To get there, stronger cooperation and partnerships across the public and private sectors are vital, there is no time to waste,” Georgieva said.

Carney was quoted as saying, “To ensure that the impact of the net-zero revolution underway in private finance benefits all countries, we need a more efficient and effective multilateral financial architecture.

The COP28 president-designate was quoted as saying: “Capital and finance are among the most important enablers of climate action and sustainable economic development.

“However, not enough is getting to the people and places that need it most. ”

He said for vulnerable communities, across the global south, climate finance was nowhere near available, affordable, or accessible enough.

“Only 20 per cent of cleantech investment is going to developing countries that make up over 70 per cent of the global population.”

“Behind every number, there are individual lives, people and communities who should have the right to fulfil their potential and contribute to sustainable global prosperity.”

He said the world needed to triple the amount of money by 2030 that is available for cleantech investment, adaptation finance, and a just energy transition in emerging and developing countries.

Al Jaber said there was a need to urgently consider fundamental reform to achieve both climate and development goals.