The outlook for global growth has improved, but still faces medium-term challenges the IMF is reporting in its latest forecast released Tuesday (October 22) in Washington, DC.
Inflation is moderating back toward target and growth stabilizing, but long-term productivity gains are still lackluster the IMF said ahead of the release of the World Economic Outlook during this weeks Annual Meetings.
“Well, we have a lot of good news that inflation is coming down as we had expected. And in most countries, we are expecting it to be back to targets. At the same time, the global economy has been quite resilient and we are expecting growth rate to be 3.2 both this year and next. The not so good news, however, is that in the medium term, we’re still expecting lackluster growth of a little bit over three,” said IMF Deputy Director of Research, Petya Koeva-Brooks.
The release of the report comes as continued war in Ukraine and conflict in the Middle East sparks geopolitical unease, and many governments in advanced economies are signaling a turn toward adopting more protectionist measures.
“Well, unlike last time, we think the risks are tilted to the downside. The main downside risks that we see are that we see an escalation of geopolitical conflict or we see a ratcheting up of trade protectionism, or that we see more weakening in labor markets than what we expect in the baseline, or that we see a renewed bout of financial market turbulence,” said Koeva-Brooks.
But what can be done? The IMF had three main recommendations to policymakers.
“We have three main policy recommendations. One relates to monetary policy for central banks to pivot towards providing more support to activity where inflation is under control. The second one is about fiscal policy that we see the need for consolidation that is credible and that is done in a growth preserving manner. And the third one is related to boosting that medium term growth by implementing structural reforms to increase productivity and labor supply.”
