The International Monetary Fund (IMF) cut its global economic growth forecast for 2022 on Tuesday, citing growing COVID-19 cases, supply chain bottlenecks and soaring inflation.
The IMF now projects global gross domestic (GDP) product to grow 4.4% in 2022, down from 5.9% growth in 2021, according to the IMF’s World Economic Outlook report published Tuesday. The IMF projected global GDP would reach 4.9% in its Fall report.
“The global economy enters 2022 in a weaker position than previously expected,” the report said, blaming “downside surprises,” including soaring COVID-19 cases and turbulent markets.
The report highlights weaker projections in the U.S. and China as central to a slowdown in global growth. (RELATED: Electricity Giant Saw Decline In Sales Due To Supply Chain Problems)
The U.S. economy is expected to grow only 4% in 2022, 1.2% lower than the IMF’s previous projection. China’s growth forecast was slashed to 4.8% for 2022 from the organization’s earlier 5.6% projection.
The IMF pointed to soaring inflation coupled as a source of higher energy prices, specifically in Brazil, Canada and Mexico.
Higher inflation is expected to last longer than previously thought, but the report says it should ease by late 2022, “as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.”
Supply chain bottlenecks will continue to add inflationary pressure that will ripple into food and energy prices, while demand will remain strong, Gita Gopinath, first deputy managing director at the IMF, said Tuesday.
Gita Gopinath, First Deputy Managing Director of the International Monetary Fund, outside the IMF’s headquarters in Washington, DC, on January 25, 2022. (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)
“Supply disruptions still weigh on activity and are contributing to higher inflation, adding to pressures from strong demand and elevated food and energy prices,” Gopinath said. “Moreover, record debt and rising inflation constrain the ability of many countries to address renewed disruptions.”
The IMF upgraded its 2023 growth forecast to 3.8% while warning of new COVID-19 variants.
“The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective,” the report said. “The emphasis is on effective global health strategy is more salient than ever.”
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