Updated Jan 31, 2023 - Economy

IMF raises global growth forecasts as inflation eases

Employees work on the assembly line of vehicles at a factory of Beijing Automobile Works (Qingdao) Co., Ltd. on January 14, 2023 in Qingdao, Shandong Province of China.

Employees work on the assembly line of vehicles at a factory of Beijing Automobile Works in Qingdao in the Shandong Province of China earlier this month. Photo: Zhang Jingang/VCG via Getty Images

The International Monetary Fund raised its 2023 global growth outlook Monday, driven by easing inflation, China reopening its economy and resilient demand in the U.S. and Europe.

What to expect: The IMF expects global growth to slow from 3.4% in 2022 to 2.9% this year — up from the 2.7% it predicted in October when it said "for many people 2023 will feel like a recession."

  • Now, the IMF expects the economy to rebound in 2024, with its chief economist Pierre-Olivier Gourinchas saying "a global recession is not in our baseline."
  • Inflation is "peaking," with 84% of countries forecast to face lower headline inflation in 2023 compared to 2022, according to the IMF World Economic update. Global inflation is set to fall from 8.8% in 2022 (annual average) to 6.6% this year and 4.3% in 2024.

Yes, but: The IMF report notes "tighter global financing conditions could worsen debt distress. Russian forces' war on Ukraine and potential "severe health outcomes in China" could also potentially impact economic activity, while inflation could still be a problem.

  • "The fight against inflation has started to bear fruit, but the battle is far from won," Gourinchas said in a post accompanying the update, noting central banks needed to continue with their efforts.

The big picture: "The global economy has shown a lot of resilience," Gourinchas said.

  • "Labor markets are tight, household spending and business investment remain strong, and European economies proved quite resilient against the energy crisis," he added.
  • "The slowdown will be more pronounced for advanced economies. China and India will account for 50% of global growth."

Meanwhile, the IMF predicts that global headline inflation will fall from 8.8% in 2022 to 4.3% in 2024, though core inflation remains too elevated.

The bottom line: Barring new shocks, "2023 could be the year of turning points, with growth bottoming out and inflation decreasing," per Gourinchas. "We're well away from any sort of global recession marker."

Our thought bubble, via Axios' Felix Salmon: The dominant narrative in 2023 looks increasingly likely to be exactly the same as we saw in 2022: No recession, despite roughly half the population being convinced we're already in one.

Read the full IMF report, via DocumentCloud:

Editor's note: This article has been updated with additional details from the IMF report and more context.

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