According to the IMF’s chief financier Pierre-Olivier Gorinchas, the war in Ukraine is not the only thing that can hinder stability, despite clear signs of economic activity.
The world economy is recovering faster than expected from the crisis caused by the energy war between Russia and the West. Thus, on July 25, the International Monetary Fund (IMF) released the report “Prospects for the development of the world economy”, in which it improved the forecast for global economic growth in 2023 by 0.2 percentage points (up to 3%). Global GDP growth is expected to be at the same level in 2024.
Therefore, according to the IMF’s chief financier Pierre-Olivier Gorinchas, it is still too early to say that all is well, despite the measured but positive forecasts. He noted that trade has returned to levels recorded before the COVID-19 pandemic, and that signs of economic activity in the first quarter of this year show the resilience of the global economy.
“Inflation may remain high and may even rise if new shocks emerge, particularly those related to the intensification of the war in Ukraine and extreme weather events, leading to tighter monetary policy,” said Pierre-Olivier Gorinchas.
According to the economist, the world economy is expected to grow by 3 percent this year. That is 0.2% higher than the IMF’s April review estimate. However, this is still significantly lower than in 2022, when the figure was 3.5%.
As for 2024, the level of economic growth in the world will remain at 3%, according to the IMF. Therefore, according to Fund analysts, global economic activity continues to be under pressure from national central banks to raise interest rates as part of anti-inflation efforts.
At the same time, the IMF expects the global headline inflation rate to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. The main factors in sustaining inflation will be the development of the labor market and the dynamics of the ratio between wages and profits.
“Real wages in developed countries and major emerging markets fell by about 3.8% in the first quarter of 2022-2023,” the review says.
According to the IMF, the “recovery” of the global economy is threatened by:
- increased inflation;
- Russia’s war against Ukraine;
- disruption of the Black Sea grain agreement;
- El Niño climate effect;
- Lag in the pace of recovery of the Chinese economy.
Recall that according to The Guardian, the poverty rate in Ukraine has increased from 5.5% to 24%, with more than 7.1 million people currently below the poverty line. The effects of poverty are most felt in rural areas.
At the same time, the UN Development Program says that if the war with Russia continues until 2023, nine out of 10 Ukrainians could face poverty and extreme economic vulnerability.
Source: Focus
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