The International Monetary Fund has cut its global growth projection by 0.5 percentage points to 4.4%, mainly driven by downgrades for America and China.
According to its latest blog, written by first deputy managing director Gita Gopinath: “In the case of the United States, this reflects lower prospects of legislating the Build Back Better fiscal package, an earlier withdrawal of extraordinary monetary accommodation, and continued supply disruptions.
“China’s downgrade reflects continued retrenchment of the real estate sector and a weaker-than-expected recovery in private consumption.”
Global growth is expected to slow to 3.8%, which is an improvement of 0.2 percentage points on the October 2021 outlook.
It “largely reflects a pickup after current drags on growth dissipate”, Gopinath wrote.
Turn on a dime
Even as the respective recoveries continue, she cautioned that “the troubling divergence in prospects across countries persists”.
“While advanced economies are projected to return to pre-pandemic trend this year, several emerging markets and developing economies are projected to have sizeable output losses in the medium term.”
In addition, China’s zero-Covid strategy could exacerbate global supply disruptions; while higher inflation surprises in the US “could result in aggressive monetary tightening by the Federal Reserve and sharply tighten global financial conditions”.