World Economic Outlook: IMF  

World Economic Outlook analyzes and predicts global economic developments during the near and medium-term. In response to the growing demand for more frequent forecast updates, the WEO Update is published in January and July, in between the two major WEO publications, usually in April and October.

It has projected global growth at 3.6 % in 2022 and 2023, 0.8 and 0.2 % lower than in the January 2022 forecast. The downgrade largely reflects the war’s direct impacts on Russia and Ukraine and global spillovers. The war has triggered a costly humanitarian crisis. 

With a few exceptions, employment and output are expected to stay below pre-pandemic levels until 2026.

Worsening supply-demand imbalances could lead to persistently high inflation. In many cases, the drivers of inflation are beyond central banks’ control (the war, sanctions, the pandemic, supply chain disruptions).

Inflation is expected to be 5.7 percent in advanced nations and 8.7 percent in emerging market and developing economies in 2022, respectively, 1.8 and 2.8 percentage points higher than projected in January.

If there are signals that inflation will be high over the medium term, central banks will be forced to react faster than currently anticipated—rising interest rates, particularly in emerging markets.

The war in Ukraine has exacerbated two difficult policy trade-offs; tackling inflation and safeguarding the recovery. Authorities have to be vigilant regarding private sector vulnerabilities to rising interest rates.

Following a huge and necessary fiscal expansion in many countries during the pandemic, debt levels are at all-time highs, and governments are more exposed than ever due to higher interest rates. But where fiscal space is more limited, governments will need to tread a difficult path between fiscal consolidation and prioritizing essential expenditures.

At the same time, fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest. The IMF report backed targeted income support by governments to alleviate stress on household budgets in countries facing large price increases.

The recent lockdowns in key manufacturing and trading hubs such as Shenzhen and Shanghai (China) due to the resurgence of covid cases will likely compound supply disruptions elsewhere in the region and beyond. The need for consolidation should not prevent governments from prioritizing spending with well-targeted support for the vulnerable—including refugees, those struggling because of commodity price spikes, and those affected by the pandemic.