The International Monetary Fund raised its 2023 global growth outlook

Earlier today, January 31st, the International Monetary Fund (IMF) raised its 2023 global growth outlook, taking the financial industry by surprise. The increase is not a major one, but even the fact that the global growth predictions grew at all was surprising for a lot of people. The IMF said that its research suggests that demand in Europe and the United States seems to be surprisingly resilient.

In addition to that, other developments that helped included an easing of energy costs, as well as the reopening of China’s economy, which came after Beijing decided to drop its extremely strict covid restrictions.

The Fund further added that the global growth is still expected to fall to 2.9% in 2023 from the last year’s 3.4%, although this figure is an improvement compared to the previous prediction made in October, when the World Economic Outlook forecast predicted 2.7% growth. The same prediction came accompanied by warnings of the upcoming recession.

The fact that the demand is higher than expected, just like the global outlook, do not confirm that the recession will be avoided, but they are still a positive sign, generally speaking.

IMF also shared its 2024 prediction, stating that global growth for the next year is expected to accelerate to 3.1%. Even so, this is only a tenth of a percentage point below the forecast made in October, and the central bank interest rate hikes have significantly slowed the demand.

Growth outlook goes up around the world

Pierre-Olivier Gourinchas, the chief economist at IMF, stated that recession risks had subsided, and central banks have managed to see some progress in gaining control over inflation. However, there is a lot more work to do in order to curb prices. Not to mention that new disruptions could emerge at any point, and from multiple sources — particularly when it comes to the war in Ukraine or China’s measures involving COVID-19. Gourinchas added that, at this point, it is necessary to be prepared and expect the unexpected. With that said, there is reason to be optimistic, as the growth does seem to be bottoming out, while inflation is declining.

As part of its 2023 GDP forecast, the IMF also said that it expects to see a 1.4% growth of US GDP, which is lower than 2.0% in 2022, but higher than the October prediction of 1%. A similar thing is seen in the euro zone, with new growth for 2023 now being 0.7%, up from 0.5% in October, but down from 3.5% in 2022.

A significantly sharper increase in growth outlook comes from China, sitting at 5.2% from a 4.4% prediction in October, and a significant increase from last year’s 3.0%, which got slashed due to the country’s lockdown policies. Now that China is reopening, the growth outlook rose by quite a bit.