IMF lowers U.S. growth forecast for China, Brazil, China

WASHINGTON, January 25, Reuters - The International Monetary Fund lowered its forecasts for the United States, China and the global economy on Tuesday, and said that uncertainty about the pandemic, supply disruptions and U.S. monetary tightening posed further risks.

We expect global growth this year to be 4.4%, a 0.5 percentage point lower than previously forecast, mainly due to the downgrades for the United States and China, Gita Gopinath, the IMF's No. You can read a post on her blog, which is 2 official.

The IMF said that the rapid spread of the Omicron variant had resulted in renewed mobility restrictions in many countries and increased labor shortages, while supply disruptions were continuing to fuel inflation. Omicron was expected to weigh on economic activity in the first quarter, but it was associated with less severe illness, according to the International Monetary Fund.

Gopinath told reporters that the global lender updated its World Economic Outlook because of the escalating conflict between Russia and Ukraine.

The IMF said the increase was largely mechanical after current drags on growth dissipation in the second half of 2022, and that global growth is projected to slow to 3.8% in 2023, a 0.2 percentage point increase from the previous forecast in October.

The pandemic is projected to result in cumulative economic losses of $13.8 trillion through 2024, compared to the previous forecast of $12.5 trillion, Gopinath, who previously served as the IMF's chief economist, said.

The IMF cut its forecast for the U.S. growth by 1.2 percentage points because of the failure of U.S. President Joe Biden to pass a massive social and climate spending package, earlier tightening of U.S. monetary policy and continued supply shortages.

The U.S. economy is projected to grow by 4% in 2022, after expanding 5.6% in 2021, with growth expected to easing further to 2.6% in 2023, according to the International Monetary Fund.

Gopinath said that we are certainly living in very turbulent times and that there was still tremendous uncertainty about how much the Federal Reserve would raise interest rates and over what period of time, as well as rising geopolitical tensions around the world.

She said rising interest rates should address exuberance in financial markets and lead to a more orderly correction as long as the Fed communicates clearly about its policy.

After 8.1% growth in 2021, the IMF downgraded China's forecast by 0.8 percentage point to 4.8% in 2022, with growth to rise to 5.2% in 2023.

The downgrade was prompted by the Pandemic-induced disruptions related to China's zero-tolerance COVID 19 policy and the long-term financial stress among property developers, according to the International Monetary Fund.

The IMF also cut its forecast for the euro area by 0.4 percentage point to 3.9% in 2022, and said growth there would slow to 2.5% in 2023.

The growth forecast for Brazil and Mexico was cut by the International Monetary Fund by 1.2 percentage points each in 2022 for the world's largest economies. Brazil is expected to grow by 0.3% this year and Mexico 2.8%, while the region is expected to grow by 2.4%, 0.6 percentage point below the previous forecast. India and Japan saw their forecasts improve a bit.

The IMF warned that the emergence of new COVID 19 variants could prolong the epidemic and cause renewed economic disruptions, while supply chain disruptions, energy price volatility and localized wage pressures posed further risks.

It revised up its 2022 inflation forecasts for both advanced and developing economies, and said that there were higher price pressures likely to persist longer than previously predicted given ongoing supply chain disruptions and high energy prices.

It said inflation was expected to be around 3.9% in advanced economies and 5.9% in emerging market and developing economies in 2022 before subsiding in 2023, aided by moderate growth in fuel and food prices over that period.

The pace of recovery between rich and poorer countries was different, while economies were still struggling to recover from the shocks of the epidemic, according to the International Monetary Fund.

While advanced economies are projected to return to pre-pandemic trends this year, several emerging markets and developing economies are facing large output losses, according to the International Monetary Fund.

In her blog, Gopinath said that seventy million more people were living in extreme poverty after the pandemic, setting back progress in poverty reduction by several years.

The IMF said it was important to have universal access to vaccines, tests, and treatments to reduce the risk of COVID 19 variants, while many countries would need to raise interest rates to curb inflation pressures.

Gopinath said that 60% of low-income countries were already in or at high risk of debt distress, and that the Group of 20 should speed up debt restructuring processes and suspend debt service payments while the restructurings are being negotiated.