IMF Cuts 2023 global growth forecast to 2.7%

. Nigeria’s projection down to 3.0%

By Clara Nwachukwu

The International Monetary Fund (IMF), has cut down its global growth forecast to 2.7% in 2023, lower than 3.2% projected for the end of this year, compared to 6.0% in 2021.

According to the latest World Economic Outlook Growth Projections, released yesterday at the on-going annual IMF/World Bank Group Meetings, the downward revision is because “Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades.”

Also, is the fact that “The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook.”  

Although sub-Saharan Africa’s is expected to be slightly higher at 3.7% next year, up from 3.6% this year, but lower than 4.7% in 2021, growth in the two biggest economies in the sub-region—Nigeria and South Africa, are expected to contract.

Nigeria’s growth was revised lower to 3.0% in 2023 compared to 3.2% this year and 3.6% in 2021, and  South Africa even lower to 1.1% in 2023 down from 2.1% in 2022 and 4.9% in 2021, respectively.      

The IMF attributed the lower projections to the tighter monetary and financial conditions being experienced in the sub-region.

It’s a very difficult global environment and the worst is yet to come. In 2023, for many countries and many people, it will feel like a recession.

Worsening crisis

Worldwide, the multilateral lender said: “This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.”

Indeed, Deputy Director at the IMF’s Research Department, Petya Koeva Brooks, said: “It’s a very difficult global environment and the worst is yet to come. In 2023, for many countries and many people, it will feel like a recession.”

It said economies representing more than a third of global output will contract next year, while growth will stall in the world’s three largest economies—the U.S., the European Union and China.

Also, the Outlook forecast global inflation to rise to 8.8% this year from 4.7% in 2021, but expected to decline to 6.5% in 2023 and to 4.1% by 2024.

The IMF said the risks to growth remain unusually large triggered by various actors including central banks’ potential miscalculations as they raise interest rates to battle inflation, further U.S. dollar appreciation, more unexpected increases in energy and food prices and reduced natural-gas supplies from Russia to Europe, among many others.

IMF Managing Director, Kristalina Georgieva, at the kick-off of the meetings on Monday, said: “What we see perhaps is a fundamental shift from the world of the last decades that was relatively predictable, with strong rules-based international order, low inflation, and low interest rates, to a world that is more volatile, more fragile.”  

The Fund therefore urged that, “Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy.”

It also suggested that “Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.”

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