Forecasting exercises for the global economy follow each other, and ultimately look the same. With each new update, the view gets worse. This time, they were judged by the International Monetary Fund (IMF). “you’re getting dark and uncertain” and which changes in different signs downwards. The international institution only expects global GDP growth of 3.2% this year. This is almost twice as low as in 2021 (6.1%). And 0.4 points lower than what was expected three months ago. Regarding inflation, it is expected to be 6.6% of the year in countries with advanced economies and 9.5% in developing and developing countries.
And again, it’s not a worst-case scenario. Pierre-Olivier Gourinchas, the IMF’s chief economist, said “a big slowdown”, without betting on a “global recession scenario”, but did not hide the concerns vis-à-vis “accumulation of adverse risks”. Among them, the war in Ukraine and the possible new consequences such as the disruption of Russian gas imports to Europe, the inflation that may take root, a fight against the increase in prices that will prove to be too expensive, excessive debt in developing countries, a recent outbreak of Covid in China… If these threats materialize, then “The world will soon find itself on the brink of a global recession, just two years after the last one”.
The United States blamed the plague
France cannot escape this collapse. Its GDP growth this year will be 2.3% – a forecast in line with many other forecasts, but below the government’s (2.5%), and it will return to only 1% next year. Here too, it is lower than the forecast of 1.4% for 2023 included by Bercy in the stability program, which the French executive is preparing to discuss with the European Commission.
Although Europe is bearing the consequences of Russia’s invasion of Ukraine and the tightening of fiscal policy, it is not alone in seeing the horizon darken. With growth estimated at 2.3% this year, 1.4 points lower than the last forecast in April, the United States suffered the blow of a slowdown in growth, a decrease in household power purchases and a tightening of monetary policy. In addition, the US Federal Reserve is preparing to raise key rates this week for the fourth time since the beginning of the year. The country is even in a fast approaching economy. The likelihood that the United States will escape it is low, the IMF estimates. Pierre-Olivier Gourinchas considered that a “Smaller shock risks plunging US economy into recession”. As for China, its GDP will grow only 3.3% in 2022, ie 1.1 points lower than the latest IMF forecast. The explanation is due to “re-containments” and on “the worsening real estate crisis” its effects “global mayors”.
A notable exception to this general deterioration is Russia. When the IMF calculated a drop in its GDP of 8.5% this year, due to Western sanctions, it only found a drop of 6%. This is especially a consequence of “Exports of crude oil and non-energy products remain better than expected” and a certain strength in domestic demand.
Inflation is taking hold worldwide as a result of “rising food and energy prices, supply constraints in many sectors and balancing demand in favor of services”, says the IMF. And it also thrives because “Cost pressures through supply chains and labor shortages, especially in advanced countries.” Wages are not keeping up with prices everywhere, purchasing power is collapsing everywhere. The IMF is also not very optimistic about the timing of the inflationary peak: “Inflation is generally expected to approach pre-pandemic levels by the end of 2024. Several factors, however, may cause it to maintain its momentum and raise higher expectations.” These factors are also related to the war waged by Russia in Ukraine, which may increase inflation and lead to further increases in key rates by central banks. “These shocks, if severe enough, lead to a recession accompanied by high and rising inflation, a phenomenon known as stagflation,” afraid of the IMF, which nevertheless determined that it “But not about the reference scenario”. Not sure that’s reassuring.