The IMF warned that “the fog around the global economic outlook has thickened” with the recent turmoil in the US banking sector and the collapse of the giant Credit Suisse, causing the positive signals illuminated at the beginning of 2023 to lose their effect. went out “in the middle of a inflation stubbornly high and the recent turmoil in the financial sector.
In its new report on ‘Global Economic Outlook’, released this Tuesday at its spring meeting in Washington, the IMF is turning this environment of financial uncertainty into a slight downward revision of the global economy. global growth that is already anemic The forecast for this year and next year (up to 2.8% and 3%, respectively, is less than a tenth of what was reported in January for each case), but warns of a cut if banking stress, which now seems to prevail, gets out of control. pulled down by slightly larger, advanced economies. “This is under control for now, but we are concerned that if conditions deteriorate significantly, this could lead to a sharper and higher slowdown,” IMF chief economist Pierre-Olivier Gourinchas warned.
“The fog regarding the global economic outlook has intensified”
“The fundamental question facing market participants and policymakers is whether these recent events are a prelude to more systemic stress that will test the resilience of the global financial system – a red flag – or are they simply an isolated manifestation of the challenges posed by monetary tightening and over a decade? financial conditions after abundant liquidity”, IMF’s ‘Global Financial Stability Report’also released that Tuesday.
But the threats do not come only from the financial sector, such that “the possibilities are crash landing [de la economía] increased significantly”, warns the IMF report. Possible worsening and contagion of tensions in the banking sector, worsening financial conditions, sovereign debt problems, the worsening of the war in Ukraine, new increases in food and energy, or continued underlying inflation, just to name a few. risks contributing to the thickening of the fog surrounding the global economy.
anemic expectations
now, baseline forecast For the world economy, assuming recent financial tensions are under control, world growth will decline from 3.4% in 2022 to 2.8% in 2023 (one-tenth of what was forecast in January), before slowly rising and in 3rd place. he needs to get it. % until completing the five-year period in 2024. “This is the lowest medium-term forecast in decades,” says the IMF, to underscore the extent of global economic weakness. In addition, he warns, in a “reasonable” scenario with more financial stress, world growth would fall to 2025 (the weakest growth since the world recession) and 1% for advanced economies in 2023. “ anemic expectations should reflect the strict policies necessary to reduce inflation [subida de tipos de interés]”The consequences of the recent worsening in financial conditions, the ongoing war in Ukraine and the growing geo-economic fragmentation,” the report states.
for set advanced economies A growth of 1.3% is expected in 2023. United States of America It will attract a majority with a forecast of 1.6% and will follow Japan (1.3%) Canada (1.5%) and eurozone (0.8%), according to IMF United Kingdomor recession (-0.3%).
for set emerging economies A 3.9% increase is expected in 2023, thanks to its shrinkage. Chinese (5.2%) and India (5.9%).
Inflation and interest rates
The body, led by Kristalina Georgieva, “assumes it unlikely. inflation return to targets by 2025 in most cases”, but assumes that “when inflation rates return to targets, structural factors are likely to allow interest rates to fall back to pre-pandemic levels”. That will be later though. For now, the IMF recommends firmness -” central banks they should “stick to their tougher stance against inflation” along with the waistline to address their financial stability concerns.
Thus, if the institution financial pressures monetary authorities “can become significantly concentrated and become a threat to the soundness of the financial system” “elections” Faced with this risk, he calls for “open communication” from central banks that “must act quickly to prevent a systemic event that could undermine the market’s confidence in the resilience of the global financial system”. If necessary for this stop interest rate hikesHe added that authorities should “make it clear that they are determined” to lower inflation as soon as possible after tensions have subsided.
So far, the “strong response” from the authorities – adds the report – has “smoothed the tension” of the market, but “market confidence remains fragile Significant tensions remain in various institutions and markets as investors reassess the soundness of the financial system. Regulatory changes Since the global financial crisis, it has made the financial system in general more resilient, especially adopted by the largest banks; however, concerns remain about hidden vulnerabilities not only in banks but also in non-bank financial intermediaries”, underlines the “Global Financial Stability Report”,