IMF's World Economic Outlook: Lowest Medium-Term Forecast in Over 30 Years, A Sign of Economic Uncertainty

The International Monetary Fund (IMF) released its global growth expectations for the medium term to be around 3% — the lowest medium-term forecast in an IMF World Economic Outlook since 1990.

The IMF said its baseline forecast "assumes that the recent financial sector stresses are contained." It comes after some banks failed in March, causing volatility across global markets.

"Financial sector stress could amplify, and contagion could take hold, weakening the real economy through a sharp deterioration in financing conditions and compelling central banks to reconsider their policy paths," the Fund said.

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"The world economy is not currently expected to return over the medium term to the rates of growth that prevailed before the pandemic," the Fund said in its latest World Economic Outlook.

In the short term, however, the IMF expects global growth of 2.8% this year and 3% in 2024, slightly below the Fund's estimates published in January. The new estimates are a cut of 0.1 percentage points for this year and next.

"The anemic outlook reflects the tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geoeconomic fragmentation," the IMF said.

The IMF expects the U.S. economy to expand by 1.6% in 2023 and the eurozone to grow by 0.8%. However, the U.K.'s economy is forecasted to contract by 0.3%.

China's GDP is expected to increase by 5.2% in 2023, and India's by 5.9%. The Russian economy — which contracted by more than 2% in 2022 — is expected to grow by 0.7%.

IMF expects global inflation to decrease, although more slowly than initially anticipated, from 8.7% in 2022 to 7% this year and 4.9% in 2024 due to lower commodity prices. However, underlying (core) inflation is likely to decline more slowly.

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