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LOWER INFLATION
The IMF forecast that global headline inflation would fall to 6.8% in 2023 from 8.7% in 2022, dropping to 5.2% in 2024, but core inflation would decline more gradually, reaching 6.0% in 2023 from 6.5% in 2022 and easing to 4.7% in 2024.
Gourinchas told Reuters it could take until the end of 2024 or early 2025 until inflation came down to central bankers' targets and the current cycle of monetary tightening would end.
The IMF warned that inflation could rise if the war in Ukraine intensified, citing concern about Russia's withdrawal from the Black Sea grain initiative, or if more extreme temperature increases caused by the El Nino weather pattern pushed up commodity prices. That in turn could trigger further rate hikes.
The IMF said world trade growth is declining and will reach just 2.0% in 2023 before rising to 3.7% in 2024, but both growth rates are well below the 5.2% clocked in 2022. The IMF raised its outlook for the United States, the world's largest economy, forecasting growth of 1.8% in 2023 versus 1.6% in April as labor markets remained strong.
It left its forecast for growth in China, the world's second-largest economy, unchanged at 5.2% in 2023 and 4.5% in 2024. But it warned that China's recovery was underperforming, and a deeper contraction in the real estate sector remained a risk.
The fund cut its outlook for Germany, now forecast to contract 0.3% in 2023 versus a 0.1% contraction in April, but sharply upgraded its forecast for the UK, now expected to grow 0.4% versus a 0.3% contraction forecast in April.
Euro zone countries are expected to grow 0.9% in 2023 and 1.5% in 2024, both up 0.1 percentage point from April.
Japan's growth was also revised upward by 0.1 percentage point to 1.4% in 2023, but the IMF left its outlook for 2024 unchanged at 1.0%.
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