The International Monetary Fund (IMF) has declared that the global battle against inflation is nearing victory, with minimal impact on economic growth. In its latest World Economic Outlook report, the IMF predicts that global inflation will decrease from 6.7% in 2022 to 5.8% in 2023, and further down to 4.3% by 2025. Inflation in wealthier countries is expected to drop even more significantly, from 4.6% in 2022 to 2.6% this year, and eventually reaching the 2% target set by most central banks by 2025.
Pierre-Olivier Gourinchas, the IMF's chief economist, said that central banks have done a good job in controlling inflation, noting that "the battle against inflation is almost won." In many countries, inflation is now close to central bank targets. This comes after a period of high inflation caused by the rapid economic recovery following the pandemic, which disrupted supply chains and led to shortages and price increases. Central banks, like the Federal Reserve and the European Central Bank, responded by raising interest rates, which, along with better supply chains, helped bring inflation down.
One of the most notable achievements, according to the IMF, is the reduction in inflation without triggering a global recession. Major economies, particularly the United States, have continued to grow, with strong consumer spending and resilient job markets, despite higher borrowing costs. The IMF upgraded its growth forecast for the U.S., predicting the economy will expand by 2.8% in 2023, slightly lower than 2022’s 2.9% but still robust. However, growth is expected to slow to 2.2% in 2024, as the U.S. government is likely to curb spending and address budget deficits.
The IMF's outlook for other major economies is less optimistic. China's growth is expected to drop from 5.2% in 2022 to 4.8% in 2023 due to a weakened housing market and low consumer confidence. In Europe, the 20 countries using the euro are forecast to achieve modest growth of 0.8% in 2023, with Germany’s economy struggling due to issues in manufacturing and real estate.
Looking ahead, the IMF warns that geopolitical tensions, such as U.S.-China antagonism, could disrupt global trade and slow growth. Additionally, challenges like labor shortages, reduced immigration, and ongoing armed conflicts in Ukraine and the Middle East pose risks to the global economy. Despite these concerns, global trade is expected to pick up, growing by 3.1% in 2024, an improvement from 2023's weaker performance.
(This article is the reworked version of a PTI feed)
