IMF forecasts cuts to global, EU economic growth

29 July 2022

On Tuesday, the International Monetary Fund updated its annual World Economic Outlook, providing a gloomy economic outlook for the world economy. According to the IMF’s outlook, global GDP growth will be limited to 3.2% for this year and 2.9% for the coming year. The figure is already down significantly from the 6.1% projected last year. 

According to the IMF’s analysts, a “tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize,” referencing the strong economic downturns in China and Russia, as well as “several shocks have hit a world economy already weakened by the pandemic” such as higher-than-expected inflation worldwide, especially in the EU, UK and US. 

To an extent, the IMF also blamed its growth on the “worse-than-anticipated slowdown” in China, which is the result of the country’s zero-COVID policy. 

For Europe specifically, the Fund explains its “significant downgrades” with the continuing spillovers from the war in Ukraine and expected tighter monetary policy as central banks move to rein in run-away inflation. As a result, its downgraded the eurozone’s growth expectations to 2.6% for this and 1.3% for the coming year. At its April revision, the IMF had still forecast 2.9% for 2022, followed by 2.5% in 2023.

With economic risks “overwhelmingly tilted to the downside,” the organisation sees even more economic risks from a sudden stop of European gas imports from Russia; stronger and more persistent inflation; tighter global financial conditions; renewed COVID-19 outbreaks and lockdowns; as well as geopolitical fragmentation impeding global trade and cooperation.