On Tuesday, the International Monetary Fund (IMF) announced that advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023.
“About 90 percent of advanced economies are projected to see a decline in growth in 2023,” the IMF said in the newly released World Economic Outlook (WEO) report.
“With the sharp slowdown, advanced economies are expected to see higher unemployment, a rise of 0.5 percentage point on average from 2022 to 2024,” it said.
“Global headline inflation in the baseline is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Inflation’s return to target is unlikely before 2025 in most cases,” the IMF’s April WEO also pointed out.
The IMF also recognized that there is “nervousness” in the markets due to banking instability and asked regulators to closely monitor possible “foci of vulnerability” in the sector.
During the WEO presentation in Washington, the IMF Research Director Pierre-Olivier Gourinchas said that the financial system is in a much more robust position compared to the situation before the 2008 financial crisis.
However, since investors often look for “the weakest link”, he recommended that national authorities do everything possible to identify risks in financial institutions and prevent instability from spreading to the rest of the economy.