Gloomy Global Outlook

The World Economic Outlook (WEO) update in July 2022 by the International Monetary Fund (IMF) has revised down the global growth forecasts. The new estimates show that the growth of global output will decline by almost half from 6.1% in 2021 to 3.2% in 2022 and then slow down further to 2.9% in 2023. The downward revisions are sharper for the advanced economies where growth will slip from 5.2% to 2.5% and then to 1.4% during the three years. In contrast, the growth in emerging market and developing economies (EMDEs) will first slow down from 6.8% to 3.6% and then recover marginally to 3.9% during the period.

Myriad reasons are ascribed to the revising down of the global growth prospects. It is pointed out that the global output has contracted in the April–June quarter of 2022, primarily due to downturns in China and Russia. The slower-than-anticipated consumer spending in the United States (US), which can affect both domestic and external sector demand, is yet another reason. Another factor that has forced a relook at growth prospects is the higher-than-expected inflation in developed economies, especially the US and Europe, which has generally triggered a tighter monetary policy in major economies. The uncertainties caused by the Ukraine war also contributed.