- The IMF reduced its outlook for global economic growth for 2023.
- Advanced economies are projected to experience a particularly pronounced slowdown.
- The group noted that turmoil in the banking sector following the collapse of Silicon Valley Bank and Signature Bank raised uncertainties.
The International Monetary Fund (IMF) reduced its outlook for global economic growth this year, saying that “risks are heavily tilted to the downside.”
In its April World Economic Outlook, the IMF indicated that worldwide gross domestic product (GDP) will be up 2.8%, down from 3.4% last year and 0.1 percentage point lower than the group’s January prediction. It projects GDP rising 3% in 2024.
That forecast came a week after the IMF warned global GDP could grow by “around 3%” a year for the next five years, the worst medium-term outlook since 1990, and below the 3.8% average over the last 20 years.
The IMF noted that advanced economies will have an especially pronounced slowdown, to a growth rate of 1.3% this year from 2.7% in 2022. Emerging market and developing economies will dip only slightly, to 3.9% from 4%.
IMF Chief Economist Pierre-Olivier Gourinchas explained that the world economy is “still recovering from the unprecedented upheavals of the last three years, and the recent banking turmoil has increased uncertainties.” Gourinchas added that recession concerns have “gained prominence,” and stubbornly high inflation persists.
The IMF warned that with the “fog around current and prospective economic conditions thickening,” government policymakers will have a narrow path to follow to bring down prices while avoiding a recession and maintaining financial stability. However, it noted that as long as financial stress is not systematic, the first priority for central banks is fighting inflation.
Analysts at economic consultancy Oxford Economics said the IMF's forecast “still looks too optimistic over the next two years," writing it would “underestimate the impact that tightening in financial conditions will have on advanced economies." They noted Oxford Economics' forecast of global growth would be published a day later.