The International Monetary Fund on Tuesday warned that the global economy might not grow at the pace it was previously predicted due to slow recoveries in the United States and China.
IMF’s latest World Economic Outlook shows a downshift in global economic growth from 5.9% in 2021 to 4.4% this year as opposed to what was predicted in the Fund’s October outlook. The October report shared that global growth was predicted at 4.9% in 2022 from 5.9% in 2021.
The Fund sees the US economy growing 4.0% this year, a 1.2 percentage points lower than its October call. Economic growth downshifts in the US is blamed on President Biden’s failure to pass the Build Back Better spending plan, the Federal Reserve’s unwinding of pandemic stimulus measures, and continuing supply shortages that are driving inflation.
On the other hand, China’s economy is growing at 4.8% this year – 0.8 percentage points lower than its October forecast. The downshift is due to business-sapping, zero-tolerance COVID-19 policy, and ongoing stress in the country’s heavily indebted property sector.
The IMF also mentions emerging Covid-19 variants as one of the deterrents of economic growth across the globe. New COVID-19 variants could prolong the pandemic and introduce fresh economic disruptions that would cause snails in supply chains, volatile energy prices, and localised wage pressures causing a rise in inflation rates.
“Rising geopolitical tensions and social unrest also pose risks to the outlook,” IMF First Deputy Managing Director Gita Gopinath told reporters during a virtual news conference on Tuesday.
Gopinath said that total economic losses from the pandemic are expected to be close to $13.8 trillion through 2024. She also highlighted a recurring theme the Fund has raised since the global economy started its long slog back to pre-pandemic health, namely the widening recovery gap between richer and poorer nations.