global growth forecasts reduced

Darker forecast for the global economy. Like other international organizations, too the IMF has cut its global growth estimatesdue to the emergence of numerous uncertainties on an international level, the war in Israel is the latest.

The Monetary Fund, on the occasion of the annual meeting underway in Marrakech, Morocco, published the latest World Economic Outlook – the previous one was dated July – in which a clear emerges slowdown in global growth to 3% in 2023 and to 2.9% in 2024, which compares with the historical average (2000-2019) of 3.8% and with the 3.5% recorded in 2022.

In more detail, the advanced economies will slow to 1.5% in 2023 and to 1.4% in 2024 from 2.6% in 2022, as the tightening of monetary policies begins to be felt, while the emerging markets and developing economies will experience a modest decline in growth to 4% both in 2023 and 2024 from 4.1% in 2022.

“The global recovery from the COVID-19 pandemic and Russia’s invasion of Ukraine remains slow and uneven. Despite the economic resilience at the beginning of this year – underlines the Monetary Fund – favored by the rebound in reopenings and the progress in reducing inflation from last year’s peaks, it is too early to relax”.

Europe comes to a halt with Germany in recession

The Monetary Fund predicts that the growth in the Euro Area will slow sharply from 3.5% of 2022 to 0.7% in 2023, to rise to 1.2% in 2024.

Among the main economies of the Bloc, the Germanywhich is worth about a third of the European economy, is confirmed in recession this year (-0.5%), while a rebound is expected next year (+0.9%). France will do betterthe second largest economy in the area, for which +1% is confirmed in 2023 and +1.3% in 2024.

Italy too will see a more pronounced slowdown phase than expected: GDP is expected to grow by 0.7% in 2023 and 2024, a far cry from the 3.7% recorded in 2022. The forecasts were thus cut compared to the July estimates by 0.4 percentage points for 2023 and 0.2 percentage points for 2024 and appear even lower to +0.8% indicated by the OECD in mid-September.

The causes of the slowdown

For the Monetary Fund there are “several forces that are holding back the recovery. Some reflect the long-term consequences of pandemicfrom the war in Ukraine and increasing geoeconomic fragmentation.”

“Other factors – it is underlined – are more cyclical, including the effects of the tightening of the monetary policy necessary to reduce inflation, the withdrawal of support tax, in a context of high debt, ed meteorological events extremes.”

Risks oriented to the downside

“While some of the extreme risks, such as those related to banking instability, have receded since April -. says the IMF – le prospects remain downward-oriented“.

“First, the real estate crisis it could worsen further in China”, underlines the Fund, hoping that the Chinese economy will abandon a growth model based on credit. “Secondly, the prices of raw material they could become more volatile due to the renovations geopolitical tensions and disruptions related to climate changes“.

Since June, the prices of petrolium have increased by around 25%, thanks to extensive supply cuts by OPEC+ – observes the Washington Institute – while the prices of foodstuffs remain high, causing severe hardship for many low-income countries. This, of course, represents a serious risk for the disinflationary strategy“.

“Thirdly, though inflation underlying that the main one have decreased, their high levels are worrying” and it therefore appears “fundamental to bring short-term inflation expectations downwards to win the battle
against inflation”. The fourth risk concerns i too high levels of debt shown by some countries, which will have to bear rising refinancing costs. “This – recalls the Fund – leaves many countries vulnerable to crises and
requires renewed attention to the management of fiscal risks”.

Despite the tightening of monetary policy, the financial conditions have loosened in many countries. The danger – it is explained – is above all that of a sharp revaluation of the risk for emerging markets and a further appreciation of the US dollar, which could trigger capital outflows, an increase in financial costs and debt difficulties”.

And Israel?

“It’s too early” to evaluate the effect of the war on Israel – admitted IMF chief economist Pierre-Olivier Gourinchas – answering a series of questions related to the conflict on the occasion of the presentation of the new growth report. Here we can evaluate the first effects on the markets.

The expert, however, indicated that research indicates that a 10% increase in oil prices would result in a global GDP contraction of around 0.15% in the following year, while global inflation would increase by around 0.4%.

Inflation slows

The IMF also confirmed a slowdown in global inflation: from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024. The slowdown – it is explained – is attributable to the effects of restrictive monetary policy initiated by central banks, but also to the decline in international prices of raw materials, especially energy ones.

Core inflation should reduce in size more gradual and, in most cases, it is not expected to return in line with the target before 2025. For this reason, monetary policy measures will be “fundamental” to keep inflation expectations anchored.

Inflation in the Euro Area specifically is expected to be above the ECB’s target value for the entire next year: to 5.6% in 2023 and to 3.3% in 2024 while it is expected to return to below the ECB target of 2% in the longer term by 2028. Inflation in Italy is expected to decline to 6% this year and 2.6% the next .

The. also contributes to inflating prices petroliumon which one weighs “high uncertainty” because of additional production cuts from OPEC+, of a military escalation in the Black Sea and insufficient investment in extraction. On the other hand, there are factors that could favor a reduction in prices the weakening of the global economy and demand from China and faster penetration of electric vehicles. In any case a price drop of 16.5% is expected around $80.50 per barrel this year to reach 72.7 dollars in 2026. Here are some analyst forecasts.