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IMF: Global economy enters 2022 slower than expected

Global economy

Washington D.C., (Business News Report) –  The global economy has started 2022 weaker than expected in light of the spread of the Omicron variant, the International Monetary Fund (IMF) said.

The IMF said in a report that Omicron, inflation, high energy prices and supply disruptions led to a weaker-than-expected start.

The report showed that the forecast for global economic growth was half a percentage point lower than the previous forecast in October. This brings the expected growth this year to 4.4%.

Global economy

The report predicted a slowdown in global economic growth to 3.8% next year. This reading represents an increase of 0.2% from the October forecast, the IMF said.

The biggest drag on the global outlook is the sharp slowing in the US and China.

With US President Joe Biden’s massive social spending plan stalled in Congress, the IMF subtracted the expected growth impact the program would have had on the economy.

As for China, the real estate debt crisis and the turmoil caused by the pandemic prompted the IMF to reduce its forecast for economic growth by 0.18% to 4.8% this year.

As for the eurozone, the IMF cut its growth forecast for this year by 0.4% to 3.9%.

Although the report reduced its forecast for the growth of the economies of a number of major countries, it kept its forecast for the Saudi economy unchanged at 4.8% for this year and at 2.8% in 2023.

High inflation

With regard to inflation, the fund expects it to remain high in the near term, with an average of 3.9% in developed countries and 5.9% in emerging markets and developing countries this year.

Assuming that medium-term inflation expectations remain firm and that the coronavirus will ease its grip on the economy, the IMF believes that rising inflation will begin to fade with the gradual easing of the supply chain crisis and monetary policy tightening, and the rebalancing of global demand away from consumer goods towards services.

The fund also expected a moderation in the rise in fuel prices during the current and next years, which would also help contain inflation.

The report stated that the balance of risks still tends to the negative side, noting that the future outlook of the global economy remains dependent on a set of risks. Most notably of which is the speed of overcoming the pandemic and how the tightening of US monetary policy affects global financial conditions.


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