Warns that “winter has come to Europe” and high inflation is putting pressure on household budgets
The global fight against inflation, Russia’s war in Ukraine and the outbreak of covid-19 in China slowed down world economic activity in 2022 and will continue to do so, and with greater intensity, in 2023. This is warned by the International Monetary Fund (IMF) in its latest report, in which it forecasts, however, a less pronounced slowdown in the economy than it thought due to the reopening of the borders in the Asian country. Thus, the agency estimates world GDP growth of 2.9% in 2023, two tenths more than in its October calculations, and a rebound of 3.1% in 2024, one tenth more.
In this way, it rules out that negative growth will be registered in the coming years, something that usually happens when there is a global recession, but it does mean an increase in activity well below the historical average (3.8%). And worse are the data from Spain, whose economy will boost only 1.1% this year, one tenth less, and 2.4%, two tenths less.
The entity led by Kristalina Georgieva warns that, after a more resilient 2022 than expected, due to the aid deployed by the European Commission, “winter has arrived in Europe”, given that the high-frequency indicators corresponding to the fourth quarter point to a contraction in the manufacturing and service sectors and a worsening of consumer confidence and business attitudes are noted. Likewise, she warns that high inflation, which stands at around 10% in several countries in the euro area and the United Kingdom, is putting pressure on household budgets.
However, the IMF considers that world inflation seems to have peaked in the third quarter of 2022 and will moderate in 2023 to 6.6% thanks to lower fuel and raw material prices. Even so, the disinflation process will take time: by 2024, average annual headline and core inflation levels are projected to still be above pre-pandemic levels in 82% and 86% of economies, respectively. . In addition, Pero estimates that core inflation has not yet peaked in most economies and remains well above pre-pandemic levels.
Less risks
“These circumstances have led central banks to raise rates faster than expected, especially in the United States and the euro area, and to issue signals that rates will remain high for longer,” explains the agency, which sees “signs” that monetary policy tightening is starting to cool demand and inflation, but the full impact will likely not materialize before 2024.
In this way, the IMF indicates that the balance of risks for the global outlook remains tilted to the downside, with room for lower growth and higher inflation, but the adverse risks have moderated last October.