Recently, the International Monetary Fund (IMF) released an update to its World Economic Outlook (WEO). This key report provides important insights into the global economy and forecasts for future growth.
Highlights from the World Economic Outlook Update
The IMF’s WEO Update has highlighted several key trends and forecasts for the global economy. Most importantly, the IMF predicts that global growth will bottom out in 2023 before starting to gather speed in 2024. This suggests that a global recession is unlikely to take place.
The Global Growth Forecast
According to the WEO, global growth was estimated at 3.4% in 2022. This figure is expected to fall to 2.9% in 2023 before rising back to 3.1% in 2024. Despite these fluctuations, the IMF does not expect a negative growth in global GDP or global GDP per capita – a phenomenon often observed during a global recession.
Slow Relief of Inflation
In terms of inflation, the WEO expects it to have peaked in 2022 but warns that disinflation will be slow to follow. This means that the rate of inflation will decrease gradually over the course of 2023 and 2024. The WEO also details that about 84% of countries are expected to have lower headline inflation in 2023 than in 2022, with global inflation set to fall to 6.6 % in 2023 and 4.3 % in 2024.
Price Rise Deceleration
The report also highlights two main reasons for the slowing rise of prices: monetary tightening globally and declining commodity prices due to faltering demand. Advanced economies are expected to experience an inflation of 4.6% in 2023, whereas emerging economies will face an inflation of 8.1%.
India’s Economic Growth
Despite external headwinds, India is projected to be the world’s fastest-growing economy in 2023 and 2024. Growth in India is expected to decrease from 6.8% in 2022 to 6.1% in 2023 before picking up again to 6.8% in 2024.
About the International Monetary Fund (IMF)
The IMF was established after World War II along with the World Bank to aid in the reconstruction of war-torn countries. Known as the Bretton Woods twins, these organisations were created during a conference held in Bretton Woods, US in 1944. The organisation is governed by and accountable to 190 member nations and its primary purpose includes ensuring stability of the international monetary system.
IMF Reports
The IMF regularly publishes several important reports, including the Global Financial Stability Report and the World Economic Outlook. The latter is usually published twice a year and provides analysis and predictions for global economic trends and developments for the near to medium term.
Previous Year Questions (PYQ) from UPSC Civil Services Examination
Prelims questions often relate to IMF tools such as the “Rapid Financing Instrument” and the “Rapid Credit Facility”. These are lending provisions provided by the IMF to member nations facing immediate financial needs. Similarly, terms like ‘Gold Tranche’ or Reserve Tranche’ refer to the credit system extended by IMF to its members.
Mains Question
A common mains question asks about the differences between the World Bank and IMF, highlighting their distinct roles and functions despite shared characteristics. Together, they are known as the Bretton Woods Institutions, named after the location where their founding conferences took place.
