IMF Downgrades Global Growth amid Supply Disruption, Slower Recovery in China and US

The International Monetary Fund (IMF) has cut its global growth forecast for this year, mainly because of downgrades for the United States and China for their individual issues and global supply disruptions.


IMF expects 2021 GDP to come in at 5.9%, while cutting its forecast for 2022 growth to 4.4% from a 4.9% growth forecast last October, according to Deputy Managing Director of the International Gita Gopinath.

In a statement published on January 25, IMF wrote that the continuing global recovery faces multiple challenges as the pandemic enters its third year. The rapid spread of the Omicron variant has led to renewed mobility restrictions in many countries and increased labor shortages. Supply disruptions still weigh on activity and are contributing to higher inflation, adding to pressures from strong demand and elevated food and energy prices. Moreover, record debt and rising inflation constrain the ability of many countries to address renewed disruptions.

Other challenges, and policy pivots, are expected to have a greater impact on the outlook. IMF projects global growth this year at 4.4%, 0.5 percentage point lower than previously forecast, mainly because of downgrades for the United States and China. In the case of the United States, this reflects lower prospects of legislating the Build Back Better fiscal package, an earlier withdrawal of extraordinary monetary accommodation, and continued supply disruptions. China’s downgrade reflects continued retrenchment of the real estate sector and a weaker-than-expected recovery in private consumption.

Supply disruptions have led to markdowns for other countries too, such as Germany. The IMF expects global growth to slow to 3.8% in 2023. This is 0.2 percentage point higher than in the October 2021 WEO and largely reflects a pickup after current drags on growth dissipate.