IMF downgrades global GDP growth forecast for 2022, sees disrupted recovery

The International Monetary Fund (IMF) on Tuesday revised upward growth for the Middle East and Central Asia (MECA) region for 2022 but downgraded growth forecast for the global economy by half a per cent due to Covid-driven mobility restrictions, high oil prices and inflation and slow vaccination programme in emerging and developing economies.

Projecting a disrupted recovery in the global economy, IMF upgraded the MECA growth forecast by 0.2 per cent to 4.3 per cent for 2022 and to 3.6 per cent for 2023, down by 0.2 per cent.

For the global economy, IMF on Tuesday projected 4.4 per cent growth, half a per cent down from its October 2021 forecast and 3.8 per cent for 2023, up by 0.2 per cent.

IMF had earlier projected that UAE’s non-oil GDP growth to exceed three per cent this year and hover around the same levels into 2026 at least.

“Global economy is entering 2022 in a weaker position than anticipated. News of the Omicron variant led to increased mobility restrictions and financial market volatility at the end of 2021. Supply disruptions have continued to weigh on activity. Meanwhile, inflation has been higher and more broad-based than anticipated, particularly in the US,” IMF said in its latest World Economic Outlook released on Tuesday.

“The continuing global recovery faces multiple challenges as the pandemic enters its third year. The rapid spread of the Omicron variant has led to renewed mobility restrictions in many countries and increased labour shortages. Supply disruptions still weigh on activity and are contributing to higher inflation, adding to pressures from strong demand and elevated food and energy prices. Moreover, record debt and rising inflation constrain the ability of many countries to address renewed disruptions,” said Gita Gopinath, first deputy managing director of IMF.

The fund warned that the risk to the global economy are tilted to the downside as the emergence of new Covid-19 variants could prolong the pandemic and induce renewed economic disruptions.

The IMF noted that since October 2021, Covid-19 deaths have averaged about 7,000 a day worldwide, down from about 10,000 in late August.

Among the major global economies, IMF downgraded advanced economies’ growth for 2022 by 0.6 per cent to 3.9 per cent for 2022, US growth was revised downward by 1.2 per cent to 4.0 per cent and the UK was lowered by 0.3 per cent to 4.7 per cent for this year.

In the Asian region, China’s growth projection was also lowered by 0.8 per cent to 4.8 per cent.

India will be the fastest-growing economy this year, growing by 9.0 per cent, up by half a per cent when compared to IMF’s October forecast. While Saudi Arabia’s economic forecast remained unchanged for 2022 and 2023.

According to World Economic Outlook, the upward revision to global growth in 2023 is mostly mechanical.

“The shocks dragging 2022 growth will dissipate and— as a result—global output in 2023 will grow a little faster… The upward revision to 2023 global growth is, however, not enough to make up ground lost due to the downgrade to 2022. Cumulative global growth over 2022 and 2023 is projected to be 0.3 percentage points lower than previously forecast,” it said.

— waheedabbas@khaleejtimes.com