Washington [US], January 25 (ANI): Amid faltering growth in the world's largest economies of the US and China due to the COVID-19 pandemic, the International Monetary Fund (IMF) on Tuesday cut down the global economic growth forecast to 4.4 per cent.
The IMF said that the fund expects global growth to slow down to 4.4 per cent this year from nearly 6 per cent in 2021. The half a percentage point cut in the 2022 growth outlook -- the IMF forecast in October the global output would expand by 4.9 per cent this year -- is a result of dimmer economic prospects in the United States and China, the world's largest economies," in its latest edition of the World Economic Outlook.
The cut is held back due to the spread of the omicron coronavirus variant, rising energy prices and persistent supply disruptions, signaling tough times ahead for households and policymakers, reported DW News.
"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," Gita Gopinath, first Deputy Managing director of the IMF, said in a blog.
"China's downgrade reflects continued retrenchment of the real estate sector and a weaker-than-expected recovery in private consumption," added Gopinath.
The IMF also downgraded Germany's 2022 growth outlook by 0.8 percentage points to 3.8 per cent as supply-chain bottlenecks continue to disrupt post-pandemic economic recovery in the export-reliant economy.
Supply disruptions have played a key role in stalling global recovery this year. Shipping snarls as well as a shipping container shortage, and a steep post-pandemic rebound in demand, have left producers, including German carmakers, struggling to source components and raw materials, reported DW News.
The chaos gripping global supply chains has been instrumental in propping up inflation globally, particularly in developed economies such as the US and Germany.
Inflation has been further pushed up by rising fossil fuel prices, which have almost doubled in the past year, and soaring food prices, particularly in sub-Saharan Africa, reported DW News.
The IMF raised its 2022 inflation forecasts for both advanced and emerging markets and developing economies, saying it expects elevated price levels to persist.
It now expects inflation to average 3.9 per cent in advanced economies and 5.9 per cent in emerging markets and developing economies in 2022, before subsiding next year.
The IMF said the global output in 2023 would grow 3.8 per cent, a little faster than previously forecast as "the shocks dragging 2022 growth will dissipate."Reiterating its earlier warning, the fund said the recoveries would continue to be unequal. While developed economies are forecast to return to the pre-pandemic trend this year, several emerging markets and developing economies are expected to take longer to get there.
Among factors that pose risks to its outlook, the IMF mentioned the emergence of deadlier coronavirus variants, China's zero-COVID strategy that could worsen supply disruptions, the highly indebted real estate sector in China and aggressive monetary tightening by the Federal Reserve, reported DW News. (ANI)