Global cooperation is also moving downwards, indicating that the stabilization of monetary policy through rising key interest rates is bearing fruit, albeit more slowly than we had originally anticipated, the Director Research by the IMF, from 8.7 percent last year to 7 percent this year, and 4.9 percent in 2024.
Gradual recovery ‘on the way’
Pierre-Olivier Gourinchas said A gradual global recovery from both the pandemic and the Russian invasion of Ukraine “is on the way”with China’s economy regaining strength, while previously disrupted supply chains are opening up.
He said that this year’s economic slowdown is concentrated in advanced economies, especially the Eurozone and the United Kingdom“Where the growth is expected to fall to 0.8 percent and -0.3 percent this year before returning to 1.4 and 1 percent respectively.”
In contrast, despite a 0.5 percentage point downward revision, many emerging market and developing economies is acceptedwith growth accelerating to 4.5 percent by the end of 2023 from 2.8 percent by the end of 2022.
‘Cancel’ reality
The IMF director, who also serves as Economic Adviser, warned that as the recent deficit caused by the collapse of Silicon Valley Bank and others, shows “the situation remains fragile. Once again, downside risk dominates and The fog around the world economic outlook has thickened.”
He said there was more still stubbornly high, more than expected by the markets, while inflation has fallen mainly due to energy consumption and food prices. Only today, the Food Industry Index of the UN (FAO), shows another fall, 20 percent which is in the high anxiety of a year ago. However, that fall has not translated into similar reductions in many supermarkets for many consumers.
Funding continues
“We expect the year-end to year-end core addition will it slowed to 5.1 percent this yearA moderated upward revision of 0.6 percentage points from our January update, and well above the target,” said Mr. Gourinchas.
He said labor markets – reflected in low unemployment rates – “are very strong in the most advanced economies”, which “may call for monetary policy to be taken forward or to remain stable for longer than the current expectation. “
He said there was “undoubtedly” that there was a significant risk of an uncontrollable wage spiral, with nominal wage gains continuing to decline after price increases, meaning a reduction in wages. real
IMF, April 2023 World Economic Outlook; and IMF staff estimates.
It’s not an easy ride
He said that more worrying are the side effects of last year’s sharp interest rate is having on the financial sector, “as we have repeatedly warned can happen.” Maybe those the surprise is that it took so long.”
He argued that due to the long period of quiet inflation and low interest rates before the global shocks of COVID and the Ukraine war, the financial sector has “become very worried”.
The brief instability in the UK gilt market last autumn and the recent banking crisis in the US “follow that there are significant vulnerabilities between banks and non-bank financial intermediaries. In both cases, financial and financial authorities took swift and strong action and, so far, have prevented further instability”, he assured.
Jitters are still strong
He concluded by warning that the sharp deterioration of global financial conditions is due to the so-called ‘risk-off’ eventwhen investors rush to play it safe and sell assets,”can have a major impact on credit conditions and public finances, especially in emerging markets and economic development. It will lead to massive capital outflows, a sudden increase in risk appetite, a rapid appreciation of the dollar to safety, and large declines in global activity amid low confidencehome finance and investment.”
In that event, he said, development may slow down to only one percent this year, means near stagnant per capita income. But this is unlikely to happen, the Director of the IMF advises: “We estimate the probability of such an outcome at about 15 percent.”
