The global economic outlook is even bleaker than expected last month, the International Monetary Fund said on Sunday, citing a steady deterioration in surveys of purchasing managers in recent months.
According to Reuters, he blamed the gloomier outlook on monetary policy tightening triggered by persistently high and broad-based inflation, weak growth momentum in China and ongoing supply disruptions and food insecurity caused by the invasion of Ukraine by Russia.
Last month, the global lender cut its global growth forecast for 2023 to 2.7% from a previous forecast of 2.9%.
In a blog prepared for a G20 leaders’ summit in Indonesia, the IMF said recent high-frequency indicators “confirm that the outlook is bleaker”, particularly in Europe.
He said recent purchasing managers’ indices that measure manufacturing and services activity signaled weakness in most major Group of 20 economies, with economic activity expected to contract while inflation remained stubbornly high. .
“Readings for a growing share of G20 countries have moved from expansionary territory earlier this year to levels that signal contraction,” the IMF said, adding that global fragmentation was adding to “a confluence of downside risks.
“The challenges facing the global economy are immense, and weakening economic indicators point to more challenges ahead,” the IMF said, adding that the current political environment was “exceptionally uncertain.”
A worsening of the energy crisis in Europe would severely hurt growth and increase inflation, while prolonged high inflation could lead to higher than expected political interest hikes and a further tightening of global financial conditions.
This in turn posed “increasing risks of a sovereign debt crisis for vulnerable economies”, the IMF said.
Increasingly severe weather events would also hurt growth around the world, he said.