First the corona pandemic, then the Ukraine war and finally rising inflation: According to the International Monetary Fund, several factors are ensuring that the economies of many nations, including Germany, will not grow as strongly as expected.
The prospects for the global economy are becoming increasingly gloomy. The International Monetary Fund (IMF) once again lowered its forecasts for most countries. The three major economic powers - the USA, China and the euro zone - are all weakening. "The outlook has darkened significantly since April," said IMF economist Pierre-Olivier Gourinchas. The downside risks would clearly predominate. A "plausible alternative scenario" holds even more pessimistic forecasts, warned Gourinchas. The global economy may soon be on the brink of recession again, just two years after the outbreak of the corona pandemic. It should only increase by 3.2 percent in 2022, and then by 2.9 percent in 2023.
The previous estimates from April were thus lowered by 0.4 and 0.7 points respectively. The IMF cited high inflation, ongoing supply chain problems, corona restrictions in China and the consequences of the Russian attack on Ukraine as reasons. For comparison: in 2021 the global economy had grown by 6.1 percent, in 2020 it had shrunk by 3.1 percent due to the pandemic.
The current very high inflation threatens the stability of the economy and the financial system, warned the Washington-based financial organization, which helps countries in need. In the US, prices rose by 9.1 percent in June and by 8.6 percent in the euro zone. It is no longer just about rising energy and food prices. Inflation is spreading more and more. For the industrialized nations, the IMF is now anticipating an inflation rate of 6.6 percent in 2022 and then 3.3 percent in 2023. In the emerging and developing countries, it is likely to be 9.5 and 7.3 percent. This means that all previous estimates have been raised by just under one percentage point.
Many experts, including the European Central Bank (ECB), initially assumed temporary inflation. However, it is now becoming increasingly clear that the values will remain high for a long time, which is why numerous central banks have already raised their interest rates, sometimes very sharply. Lowering inflation rates and getting them under control must have absolute priority, according to IMF economist Gourinchas. Many central banks, such as the ECB, aim for an inflation rate of two percent as the optimal value for the economy.
The IMF pointed to numerous risks. If they occur, the global economy could do even worse. A complete lack of gas supplies from Russia, for example, could be a trigger for this and also lead to even higher inflation. This would primarily affect Europe. In this negative scenario, the global economy would only grow by 2.6 percent in 2022 and by 2.0 percent in 2023. Values below two percent are very rare for the global economy, they have only occurred five times since 1970.
The IMF now predicts growth of 2.3 percent for the US economy in 2022. In 2023 it should be 1.0 percent. Similar values are expected for the euro zone with 2.6 and 1.2 percent. Germany is likely to do even worse. Here, only growth rates of 1.2 and 0.8 percent are expected for the years 2022 and 2023. In China, in addition to the corona lockdowns, the troubled real estate market is also causing problems. Here, the IMF experts expect growth rates of 3.3 and 4.6 percent - little by Chinese standards.
