Global economy looks solid, IMF forecast: Things look only bad for Germany

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The global economy is only slowly recovering from the consequences of the corona pandemic, Russia’s war against Ukraine and high inflation; growth has been historically weak. According to the IMF, expectations for the German economy continue to deteriorate. According to the economic forecast presented on Tuesday, the International Monetary Fund (IMF) expects the German economy to shrink by 0.5 percent this year; This is another downward correction. IMF economists are more optimistic about the global economy as a whole. But IMF chief economist Pierre-Olivier Gourinchas warns: “The global economy is limping, not accelerating.”

In its last forecast in July, the IMF predicted a 0.3 percent decline in economic output in Germany; currently 0.5 percent. However, the German economy is expected to grow again by 0.9 percent next year. But that figure is still 0.4 percentage points below what was assumed in July. The fund cites the weakness of interest rate-sensitive sectors, the decrease in demand from trading partners and the resulting weakness in industrial production as reasons. The German economy grew by 1.8 percent in 2022.

Growth is slowing but not stagnating

The growth forecast for the global economy this year is at 3.0 percent, as in July. It revised its funding forecast slightly downwards for next year, dropping it to 2.9 percent (minus 0.1 points). The global economy grew by 3.5 percent in 2022. Looking back, the resilience of the global economy is remarkable, considering the various crises, according to the IMF.

Although growth has slowed, it has not come to a halt. However, growth remains uneven around the world, chief economist Gourinchas says. Therefore, the slowdown is more pronounced in industrialized countries than in poor countries. A full recovery back to pre-pandemic trends looks increasingly out of reach. According to the IMF, growth will slow down due to tight monetary policy due to high inflation and extreme weather events, in addition to the consequences of the pandemic and the war in Ukraine.

Inflation increases more than expected

The IMF expects global inflation for this year to average 6.9 percent, 0.1 percentage point above its forecast in July. It should be 5.8 percent next year. The IMF warns that central banks’ first priority is to get on the ball and control high consumer prices. It is too early to declare victory in the fight against inflation.

Food prices remain high and could rise further as the war in Ukraine escalates, the IMF said. This will cause great difficulties for many poor countries. Raw material prices may also fluctuate further due to geopolitical tensions and climate change. In general, the economy is slowly growing at a historical pace: from 2000 to 2019, that is, until the corona pandemic, the annual average was 3.8 percent. (SDA/sak)

Source :Blick