Warns that “winter has come to Europe” and that high inflation is putting pressure on household budgets
The global battle against inflation, Russia’s war in Ukraine and the Covid-19 outbreak in China have slowed global economic activity in 2022 and will continue to do so in 2023, and with greater intensity. This is warned by the International Monetary Fund (IMF) in its latest report, in which it predicts, however, a less pronounced slowdown in the economy than expected due to the reopening of borders in the Asian country. For example, the bureau estimates global GDP growth of 2.9% in 2023, two-tenths more than in the October calculations, and a rebound of 3.1% in 2024, one-tenth more.
This rules out negative growth in the coming years, something that usually happens during a global recession, but it means an increase in activity well below the historical average (3.8%). And worse is the data from Spain, whose economy will grow only 1.1% this year, one tenth less, and 2.4%, two tenths less.
The entity led by Kristalina Georgieva warns that, after a more resilient 2022 than expected, thanks to the help of the European Commission, “winter has arrived in Europe” as the high-frequency indicators corresponding to the fourth quarter point to a contraction in the manufacturing and services sectors and a deterioration in consumer confidence and business attitudes. It also warns that high inflation, hovering around 10% in several euro area countries and the UK, is putting pressure on household budgets.
However, the IMF believes that global inflation appears to have peaked in the third quarter of 2022 and will moderate to 6.6% in 2023 thanks to lower fuel and commodity prices. Still, the disinflation process will take time: by 2024, average annual headline and core inflation are still expected to be above pre-pandemic levels in 82% and 86% of economies respectively. In addition, Pero estimates that core inflation in most economies has not yet peaked and remains well above pre-pandemic levels.
“These conditions have led central banks to raise interest rates faster than expected, especially in the United States and the euro area, and to send signals that interest rates will remain high for longer,” the agency explains, which “signs sees monetary policy tightening. demand and inflation are starting to cool, but the full impact will probably not be felt until 2024.
In this way, the IMF is signaling that the balance of risks to the global outlook remains on the downside, with room for lower growth and higher inflation, but adverse risks have been dampened last October.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
