Revised World Economic Outlook highlights upward and downward risks on global economy.
The International Monetary Fund (IMF) presented its latest World Economic Outlook on Tuesday, projecting global growth to slow down less than anticipated. From 3.5 percent last year to 3 percent this year, a 0.2 percentage point upward revision for 2023. However, the report also highlights possible risks that could shift this sentiment both upward and downward. The central issue now is high inflation around the world. Surprisingly fast declining inflation presents a possible upward risk which could adjust the IMF’s projection higher. On the other hand, longer-than-expected persisting inflation would present the opposite. In addition, the report highlights that China’s recent economic forecasts and a slower recovery of its economy also have implications for the rest of the world in terms of trade. Geopolitical fragmentation presents the most severe downside risk, the report emphasizes. Should the world economy further separate into blocs, geopolitical tensions could escalate.
Two examples of these tensions are the ongoing war in Ukraine and recent Chinese export restrictions on gallium and germanium which could be followed by further trade regulations, especially in strategic goods like critical minerals. Deepening rifts would lead to increasing volatility in commodities and hindering multilateral cooperation, slowing the world economy down.