World Economic Outlook 2023

What’s in today’s article?

• Why in news?
• What is World Economic Outlook?
• News summary: key takeaways from IMF’s latest World Economic Outlook update

Why in news?

• In its January update of the World Economic Outlook (WEO) report, the IMF has marginally improved the forecast for global growth in 2023 — a relief, given the fears of a global recession in 2023.

World Economic Outlook

• The World Economic Outlook (WEO) is a comprehensive report published twice a year by the International Monetary Fund (IMF).
  • The WEO is usually published in April and October, followed by the less comprehensive WEO updates in July and January.
• The report provides output, inflation, employment, fiscal balances, and debt statistics for member countries.
• The report, best known for its global growth forecasts, summarizes the state of the global economy and highlights the most important recent developments.

News summary

• Global growth will bottom out in 2023
  • In the October 2022 WEO, the IMF forecast that the global growth rate will decelerate from 3.4% in 2022 to 2.7% in 2023. 
  • At that time the IMF painted a grim picture: 
    • More than a third of the global economy will contract this year or next, while the three largest economies—the United States, the European Union, and China—will continue to stall. 
    • In short, the worst is yet to come, and for many people 2023 will feel like a recession.
  • However, in the January update, the IMF effectively rules out a global recession.
    • It said that the negative growth in global GDP—which often happens when there is a global recession—is not expected.
  • Instead, it expects global growth to bottom out in 2023 before starting to gather speed in 2024.
  • The global growth, which was estimated at 3.4 percent in 2022, is now projected to fall to 2.9 percent in 2023 before rising to 3.1 percent in 2024.
• Global inflation has peaked but relief will be slow
  • Inflation, which destabilised the global economy, is expected to have peaked in 2022.
  • However, the disinflation (the fall in inflation rate) will be slow and take all of 2023 and 2024.
  • Global inflation is set to fall from 8.8 percent in 2022 (annual average) to 6.6 percent in 2023 and 4.3 percent in 2024.
    • Pre-pandemic (2017–19) inflation levels was about 3.5 percent.
  • Price rise is slowing for two main reasons: 
    • Monetary tightening all across the world — higher interest rates drag down overall demand for goods and services and that, in turn, slows down inflation. 
    • In the wake of a faltering demand, prices of different commodities — both fuel and non-fuel — have come down from their recent highs.
• India will stay the world’s fastest growing major economy in 2023 and 2024
  • Growth in India is set to decline from 6.8 percent in 2022 to 6.1 percent in 2023 before picking up to 6.8 percent in 2024.
    • Growth will pick due to resilient domestic demand despite external headwinds.
  • This means India will remain the world’s fastest growing major economy both in 2023 as well as 2024.
    • India’s GDP growth rate is expected to be significantly higher than all its comparable economies, especially China (which is set to grow at 5.4% in 2023 and 4.5% in 2024).

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Q1) What is the IMF?

The International Monetary Fund (IMF) works to achieve sustainable growth and prosperity for all of its 190 member countries. It works to achieve sustainable growth and prosperity for all of its 190 member countries.
 

Q2) What is the difference between World Bank and IMF?

The World Bank Group works with developing countries to reduce poverty and increase shared prosperity, while the International Monetary Fund serves to stabilize the international monetary system and acts as a monitor of the world’s currencies.

Source: Key takeaways from IMF’s latest World Economic Outlook update  |  IMF