The IMF warns of a global economic slowdown driven by higher interest rates, the Ukraine conflict, and geopolitical tensions, projecting a decline in growth to 2.9% in 2024. This downshift occurs as the world continues to recover from the short-lived COVID-19 recession in 2020, and the Israel-Hamas conflict adds new uncertainty, particularly impacting oil prices. Previous shocks, including the pandemic and Russia’s Ukraine war, have collectively reduced global economic output by approximately $3.7 trillion compared to pre-COVID trends over the past three years.
IMF Economist on Global Economic Trends
At the IMF’s Marrakech meeting, Chief Economist Pierre-Olivier Gourinchas expressed concerns about the global economy’s sluggishness, describing it as “limping along.” The IMF’s current-year growth projection remains at 3%, in line with July forecasts but lower than the previous year. Gourinchas noted it is too early to assess the economic impact of the recent Israel-Hamas conflict but highlighted that oil prices have risen, reflecting potential risks associated with regional oil production and transport disruptions.
The value of oil impacting economy
Economist Pierre-Olivier Gourinchas highlights that a sustained increase in oil prices could impact global economic growth and inflation, but cautions that drawing definitive conclusions at this stage is premature. While there has been a modest rise in oil prices, commodities analyst Carsten Fritsch notes that the absence of support declarations for Hamas from key oil-producing nations makes supply restrictions unlikely in response to the conflict. Despite global central banks raising interest rates to combat inflation, the world economy has displayed remarkable resilience so far.
The US economy’s resilience amidst global challenges
Global efforts to curb inflation through interest rate hikes indicate a potential “soft landing” for the world economy. The IMF foresees reduced global consumer price inflation, while the U.S. receives an upward economic growth revision in 2024, showcasing its resilience amidst global challenges, as per the latest World Economic Outlook.
Economic Challenges Across Global Regions
Amidst escalating energy prices, the IMF offers a gloomier outlook for the 20 eurozone countries. The eurozone’s growth projection is downgraded in the current year, with Germany’s economy expected to contract in 2023 before recovering to growth next year. This places Germany’s growth outlook below that of Russia, which is projected to expand in the current year.
China, the world’s second-largest economy, faces downgraded growth forecasts and is expecting an expansion this year and this turned out to be BNN breaking highlight. These adjustments are attributed to challenges in China’s housing market, despite expectations of a rebound in 2023 following the relaxation of strict “zero-COVID” lockdowns. The IMF reiterates concerns about the emergence of geopolitical blocs that could hinder international trade and global economic growth.
Global Economic Challenges and Growing Trade Restrictions
As the global economy faces a complex landscape with rising geopolitical tensions, trade restrictions have become increasingly prevalent. BNN breaking highlights the imposition of unprecedented sanctions on Russia due to the Ukraine conflict and a growing desire among the United States and its allies to reduce reliance on Chinese imports, accentuating these trade dynamics. Over the past year, countries have implemented nearly new trade restrictions. There has also been a stark rise in the impact of international trade growth. The IMF has consequently adjusted its trade forecasts, with expectations of only 0.9% growth this year, which shows a considerable drop from the % annual average until 2019, underscoring the hurdles within the global trade arena.