The International Monetary Fund lowered its growth forecast for the global economy for the second time this year, due to Russia’s war in Ukraine that has exacerbated inflationary pressures and derailed the momentum of the recovery from the Covid-19 pandemic and a slowdown in China.
The IMF now projects global growth at 3.2 per cent in 2022 and 2.9 per cent in 2023, revising it down 0.4 and 0.7 percentage points from its April forecast, respectively. This compares with a 6.1 per cent expansion last year.
The fund warned if further risks materialise and inflation rises further, global growth could decline to about 2.6 per cent and 2 per cent in 2022 and 2023, respectively, which would put growth in the bottom 10 per cent of outcomes since 1970.
"The global economy ... is facing an increasingly gloomy and uncertain outlook," said Pierre-Olivier Gourinchas, the IMF's chief economist.
The revision largely reflects the global spillover of Russia’s military offensive in Ukraine and the slashing of growth forecasts for advanced economies and China by more than half, all of which weighed on the outlook.
A four-decade high inflation in the US, the world's largest economy, as well as the UK and a similar trajectory in major European economies has led to central banks increasing interest rates.
A slowdown in China’s economy has added to global supply chain disruptions and crimped global growth. The world's second largest economy grew at the slowest pace since the initial coronavirus outbreak in 2020 in the second quarter of this year, due to renewed Covid-19 outbreaks and the country's zero-Covid approach that led to fresh lockdowns.
The confluence of all these elements led to global output contracting in the second quarter of this year.
Advanced economies are now set to grow 2.5 per cent this year, compared with an earlier 3.3 per cent estimate and after expanding 5.2 per cent in 2021. The US, the biggest of the group, is forecast to expand 2.3 per cent instead of a previous 3.7 per cent estimate and down from 5.7 per cent last year.
Rising consumer prices forced the US Federal Reserve last month to raise its policy rate by a larger-than-expected 0.75 percentage point, its biggest rate rise since 1994. The central bank is expected to raise rates again on Wednesday, as it aims to bring inflation down towards its target range of 2 per cent. Inflation in the US hit 9.1 per cent in June, the highest level since 1981.
Germany, Europe's largest economy, is set to grow to 1.2 per cent this year and slow down to 0.8 per cent in 2023, after it expanded 2.9 per cent in 2021. France, the euro area's second-largest economy, is forecast to grow 2.3 per cent this year with output estimated at 1 per cent in 2023, after a 6.8 per cent expansion in 2021.
Japan, the world's third-largest economy, which has started to welcome visitors as part of tour groups, is projected to grow 1.7 per cent this year and next. The UK, the world's fifth-largest economy, is expected to expand 3.2 per cent in 2022 and decelerate to 0.5 per cent in 2023, after expanding 7.4 per cent last year.
Emerging market and developing economies are now projected to grow 3.6 per cent this year, down from 6.8 per cent in 2021, with China's output slowing to 3.3 per cent after an 8.1 per cent expansion last year.
The Middle East and Central Asia are forecast to grow 4.8 per cent after expanding 5.8 per cent in 2021. Saudi Arabia, the Arab world’s largest economy, is forecast to grow 7.6 per cent after expanding 3.2 per cent last year. The kingdom, the world's largest exporter of oil, has benefited from the rally of crude prices this year after Brent, the global benchmark for two thirds of the world's oil, rose about 67 per cent in 2021 and gained about 37 per cent since the start of this year.
Oil prices soared to nearly $140 a barrel in March, their highest since 2008, after the US said it would ban the import of Russian crude and the EU would follow suit, in a bid to freeze the world's second largest energy exporter out of global markets and isolate Moscow economically for its military offensive in Ukraine.
Futures prices point to oil prices averaging $103.88 per barrel in 2022, about 50 per cent higher than the 2021 average and are expected to fall to $91.07 in 2023, according to the fund.
The IMF pointed to increasing risks for some countries as borrowing costs rise amid rising inflation after governments and central banks across the world, which provided more than $16 trillion of fiscal and $9tn of monetary support to help economies recover, tighten policy.
Market dynamics are different today from the 1970s and early 1980s when surpluses from oil exporters increased funding for emerging market economy debt markets and central banks tightened policies to fight high inflation.
While the past situation led to debt defaults in countries in Latin America, the increased exposure to other large bilateral creditors today and the recent pandemic have brought new vulnerabilities, driving up public debt and eroding future potential growth in many countries, the fund said.
About 60 per cent of low-income countries are in or at high risk of debt distress, compared with 20 per cent a decade ago, the IMF estimates.
Higher borrowing costs, diminished credit flows, a stronger dollar and weaker growth will push even more into distress, Mr Gourinchas said.
Looking ahead, fighting inflation should be a key policy imperative, he said.
Inflation is forecast to average 8.3 per cent globally this year, with an aggregate of 6.6 per cent in advanced economies and 9.5 per cent across emerging market and developing economies.
"Inflation at current levels represents a clear risk for current and future macroeconomic stability and bringing it back to central bank targets should be the top priority for policymakers," Mr Gourinchas said.
"The resulting synchronised monetary tightening across countries is historically unprecedented, and its effects are expected to bite, with global growth slowing next year and inflation decelerating."
While tighter monetary policy will have real economic costs, delaying it will only exacerbate the hardship, he said.
Central banks that have started tightening should continue until inflation is tamed and targeted fiscal support can help cushion the impact on the most vulnerable.
"With government budgets stretched by the pandemic and the need for an overall disinflationary macroeconomic policy stance, offsetting targeted support with higher taxes or lower government spending will ensure that fiscal policy does not make the job of monetary policy even harder," Mr Gourinchas said.
Sui Dhaaga: Made in India
Director: Sharat Katariya
Starring: Varun Dhawan, Anushka Sharma, Raghubir Yadav
3.5/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Read more about the coronavirus
OPINIONS ON PALESTINE & ISRAEL
Company Profile
Founder: Omar Onsi
Launched: 2018
Employees: 35
Financing stage: Seed round ($12 million)
Investors: B&Y, Phoenician Funds, M1 Group, Shorooq Partners
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
More coverage from the Future Forum
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RESULTS
2.15pm: Al Marwan Group Holding – Handicap (PA) Dh40,000 (Dirt) 1,200m
Winner: SS Jalmod, Antonio Fresu (jockey), Ibrahim Al Hadhrami (trainer)
2.45pm: Sharjah Equine Hospital – Maiden (PA) Dh40,000 (D) 1,000m
Winner: Ghallieah, Sebastien Martino, Jean-Claude Pecout
3.15pm: Al Marwan Group Holding – Handicap (PA) Dh40,000 (D) 1,700m
Winner: Inthar, Saif Al Balushi, Khalifa Al Neyadi
3.45pm: Al Ain Stud Emirates Breeders Trophy – Conditions (PA) Dh50,000 (D) 1,700m
Winner: MH Rahal, Richard Mullen, Elise Jeanne
4.25pm: Sheikh Mansour bin Zayed Al Nahyan Cup – Prestige Handicap (PA) Dh100,000 (D) 1,200m
Winner: JAP Aneed, Ray Dawson, Irfan Ellahi
4.45pm: Sharjah Equine Hospital – Handicap (TB) Dh40,000 (D) 1,200m
Winner: Edaraat, Antonio Fresu, Musabah Al Muhairi
UAE currency: the story behind the money in your pockets
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
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The view from The National
The Book of Collateral Damage
Sinan Antoon
(Yale University Press)
Bullet%20Train
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UAE currency: the story behind the money in your pockets
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The biog
Favourite book: You Are the Placebo – Making your mind matter, by Dr Joe Dispenza
Hobby: Running and watching Welsh rugby
Travel destination: Cyprus in the summer
Life goals: To be an aspirational and passionate University educator, enjoy life, be healthy and be the best dad possible.
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
