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Optimistic Sign For The World Economy

31st January 2023 post by MOIT Vietnam

The International Monetary Fund (IMF) predicted a 2.7% growth rate in October 2022 and issued a recession warning for the world economy for 2023.  The International Monetary Fund (IMF) revised their projection for this index, which increased by 0.2 percentage points, or 2.9%, as of January 31, 2023, indicating that they are more optimistic about the state of the world economy.

Ảnh minh hoạ - Ảnh: Reuters.

Global economic growth in 2024 was projected by the International Monetary Fund to be 3.1%, down from 3.2% in October 2022, due to the impact of other countries' interest rate raise policies. Nonetheless, this signal indicates that the world economy will pick up speed in 2024 compared to 2023.

Pierre-Olivier Gourinchas, the International Monetary Fund's Research Director, said that the risks linked to the global economic downturn had been mitigated. To keep inflation under control, central banks are making use of their expertise. A revival of COVID-19 or the prospect of heightened hostilities in Ukraine are two examples of the obstacles that leaders must overcome despite positive advances. Another is the prospect of stricter regulations imposed by China.

Mr. Gourinchas shared his predictions for the global economy in 2023 with the press, stating, "We need to prepare for unexpected bad situations, but the world may be about to reach a turning point when growth bottoms out and inflation goes down."

The US economy is forecast to expand by 1.4% in 2023, up from 0.8% in October 2022, according to the International Monetary Fund (IMF). This rise is in response to stronger-than-expected growth in investment and consumption in the third quarter, tighter labor markets, and stable family finances.

The most recent projections from the International Monetary Fund show that the Eurozone region would achieve a growth rate of 3.5% in 2022, whereas this year the European economy is only anticipated to rise by 0.7%. While the IMF had anticipated this index to reach 0.5% in October 2022, they are now more positive about Europe based on this figure, despite its low value. Europe has responded to the increasing cost of energy more rapidly than expected, and the recent decline in energy prices has boosted the European economy, so there is cause for optimism.

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The International Monetary Fund (IMF) projects a 0.6% decline in GDP for the United Kingdom in 2023, despite the fact that it is a major industrialized country. Across the country, food, rent, and energy costs are on the rise, putting a strain on household budgets.
This year, the International Monetary Fund has considerably raised China's GDP forecast to 5.2% from an earlier estimate of 4.4% in October of last year. When it comes to economies, China is in the bottom tier. As a result of the government's strict Zero Covid policy, China's GDP expanded at a slower pace than the global average for the first time in over 40 years in 2022, when the COVID-19 pandemic devastated the country.

With the International Monetary Fund predicting 6.1% GDP growth in 2023 and 6.8% in 2024, India's economy is showing indications of strong progress despite global economic concerns.

Mr. Gourinchas predicts that China and India will drive global economic growth this year, accounting for nearly half of the total. Commodity prices may rise as a result of China's reopening, but "overall, we view China's reopening as a boon to the global economy" because it will relieve production bottlenecks and boost demand among Chinese consumers.

Despite encouraging signs following China's opening, the International Monetary Fund predicts that crude oil prices will fall in 2023 and 2024 due to a slowdown in global economic development.

The tourist industry, in particular, stands to benefit from higher savings, which the IMF anticipates will result in consistent demand growth. Furthermore, central banks in developed countries are seeing less of a need to raise interest rates as the labor market tightens.

Global economy faces challenging 2023 - OMFIF

The global economy's future is also precariously predicated on potential risks. Real estate in China is already in jeopardy, and the COVID-19 epidemic is just waiting for the right moment to resurface and make matters even worse. The political and military situation in Ukraine is deteriorating, which may cause food and energy prices to rise again, make it more difficult for Europe to hold on to its gas supplies, and force it to compete with China for liquefied gas.

Despite the fact that inflation rates have fallen dramatically, markets may still be exposed to persistent core inflation if central banks ease financial conditions too quickly. To ensure a sustained decline in inflation, central banks must remain vigilant.

According to the International Monetary Fund's head of research, countries should "at least bring monetary policy a little tighter than the neutral threshold and keep it there." The next step for nations is to monitor the economy's reaction to changes in pricing dynamics. There is plenty of time to change course in order to avoid a tense situation.