IMF boosts growth forecast on China reopening
The International Monetary Fund on Tuesday raised its 2023 global growth outlook slightly due to "surprisingly resilient" demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing rolled back Covid-19 restrictions. The IMF said global growth would still fall to 2.9 percent in 2023 from 3.4 percent in 2022, but its latest World Economic Outlook forecasts mark an improvement over an October prediction of 2.7 percent growth this year with warnings that the world could easily tip into recession. For 2024, the IMF said global growth would accelerate slightly to 3.1 percent, but this is a tenth of a percentage point below the October forecast as the full impact of steeper central bank interest rate hikes slows demand. IMF chief economist Pierre-Olivier Gourinchas said recession risks had subsided and central banks are making progress in controlling inflation, but more work was needed to curb prices and new disruptions could come from further escalation of the war in Ukraine. "We have to sort of be prepared to expect the unexpected, but it could well represent a turning point, with growth bottoming out and then inflation declining," Gourinchas told reporters of the 2023 outlook. The IMF revised China's growth outlook sharply higher to 5.2 percent for 2023, from 4.4 percent in the October forecast, after China's growth rate fell to 3.0 percent – a pace below the global average for the first time in more than 40 years. The Fund added that China's growth will "fall to 4.5 percent in 2024 before settling at below 4 percent over the medium term amid declining business dynamism and slow progress on structural reforms." At the same time, India's outlook remains robust, with unchanged forecasts for a dip in 2023 growth to 6.1 percent but a rebound to 6.8 percent in 2024, matching its 2022 performance. Gourinchas said together, the two Asian powerhouse economies will supply over 50 percent of global growth in 2023. He acknowledged that China's reopening would put some upward pressure on commodity prices, but "on balance, I think we view the reopening of China as a benefit to the global economy" as it will help ease production bottlenecks that have worsened inflation and by creating more demand from Chinese households. The IMF said it now expected US GDP growth of 1.4 percent, up from 1.0 percent predicted in October and following 2.0 percent growth in 2022. It cited stronger-than-expected consumption and investment in the third quarter of 2022, a robust labour market and strong consumer balance sheets. It said the euro zone had made similar gains, with 2023 growth for the bloc now forecast at 0.7 percent, versus 0.5 percent in the October outlook, following 3.5 percent growth in 2022. The IMF said Europe had adapted to higher energy costs more quickly than expected, and an easing of energy prices had helped the region. Britain was the only major advanced economy the IMF predicted to be in recession this year, with a 0.6 percent fall in GDP as households struggle with rising living costs, including for energy and mortgages. (Reuters)