The International Monetary Fund on Tuesday cut its forecasts for the global economy, warning of the slowest growth since 1990 and the risks as financial-sector turmoil adds to headwinds from tighter monetary policy and Russia’s invasion of Ukraine.
The IMF predicted in its quarterly update to the World Economic Outlook that gross domestic product growth would slow to 2.8% this year and 3% next year, respectively. This is in contrast to the 3.4% growth seen in 2022. And in five years, global growth is anticipated to be around 3%, the lowest medium-term projection in an IMF World Economic Outlook since 1990.
“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 report.
Last month’s unexpected collapses of Silicon Valley Bank and Signature Bank in the U.S., as well as the failure of Credit Suisse Group, rattled markets and sparked financial-stability concerns, affecting central banks’ efforts to contain inflation while sustaining growth and the health of the banking system.
“The risks are weighted heavily to the downside, in large part because of the financial turmoil of the last month and a half,” said Pierre-Olivier Gourinchas, the fund’s chief economist. “That is under control as of now, but we are concerned that this could result in a sharper and a more elevated downturn if financial conditions were to worsen significantly.”