São Paulo – Global inflation is expected to fall in 2023 and 2024, amid subpar economic growth. So predicted the International Monetary Fund (IMF) in its World Economic Outlook on Tuesday (31).
The Fund projects that global growth will fall from an estimated 3.4% in 2022 to 2.9% in 2023, then rise to 3.1% in 2024. The forecast is higher than predicted in the last IMF survey but below the historical average of 3.8%. Global inflation is expected to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic levels of about 3.5%.
The agency said that the rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. According to the IMF, the rapid spread of COVID-19 in China dampened growth last year, but the recent reopening has paved the way for a faster-than-expected recovery.
On the upside, the Fund said adverse risks have moderated since the October 2022 World Economic Forum. According to the agency, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible.
On the other hand, severe health outcomes in China could hold back the recovery, and the war could tighten global financing costs, thus worsening debt distress. The Fund envisions that financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress.
The IMF said that in most economies, amid the cost-of-living crisis, the priority remains achieving sustained disinflation. The Fund suggested the deployment of tools to strengthen debt restructuring frameworks and the acceleration of COVID-19 vaccinations in China to safeguard the world recovery.
The agency added in its report that it believes that fiscal support should be better targeted at those most affected by elevated food and energy prices, and broad-based fiscal relief measures should be withdrawn. According to the IMF, stronger multilateral cooperation is essential to preserve the gains from the rules-based multilateral system and to mitigate climate change.
Translated by Guilherme Miranda
