In the latest World Economic Outlook Update released by the International Monetary Fund (IMF), global economic growth is projected to face a significant slowdown, while inflation continues to be a persistent concern. The report, based on data up to July 2023, highlights the challenges that advanced and emerging economies are expected to encounter in the coming years.
For advanced economies, the growth outlook remains bleak, with an expected slowdown from 2.7% in 2022 to a mere 1.5% in 2023. The IMF report indicates that approximately 93% of advanced economies are likely to experience lower growth rates in 2023, and growth is anticipated to remain subdued at 1.4% in 2024.
On the global scale, world output is projected to grow by 3.0% in both 2023 and 2024. The stability in global growth is primarily supported by emerging markets and developing economies, which are estimated to achieve growth rates of 4.0% in 2023 and 4.1% in 2024. However, the report points out that this average conceals divergent growth patterns within this group.
Despite relatively stable global growth, inflation remains a key concern. Global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and further down to 5.2% in 2024. While central banks are urged to address inflation pressures, IMF experts caution that core inflation is declining more gradually than anticipated, posing risks to several advanced economies.
Outlook for Central Asia
Central Asia, a region of strategic importance, is expected to face mixed economic prospects amid the global economic slowdown and inflationary pressures. According to the IMF report, growth in the Middle East and Central Asia is projected to decline from 5.4% in 2022 to 2.5% in 2023 with a downward revision of 0.4%. This is mainly attributable to a substantial growth slowdown in Saudi Arabia, a key regional player. The downgrade in Saudi Arabia's growth forecast for 2023 is a result of production cuts announced in April and June, in accordance with an agreement among OPEC+ members (Organization of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters). Despite the impact on the oil sector, the country's non-oil GDP growth remains robust, supported by substantial private investments and the implementation of large-scale "giga-projects."
The report also highlights concerns over the war in Ukraine, which could intensify geopolitical tensions and further impact commodity prices, particularly oil and gas, posing risks for Central Asian economies heavily reliant on these resources. To navigate the challenges, countries in Central Asia are encouraged to strengthen fiscal buffers, diversify their economies, and invest in sustainable infrastructure and human capital development to foster economic resilience in the face of global uncertainties.
In response to the challenges ahead, the IMF outlines several policy priorities. Conquering inflation is crucial, and central banks in economies facing elevated and persistent core inflation are encouraged to maintain a restrictive stance until clear signs of cooling inflation emerge. Additionally, fiscal consolidation and the rebuilding of fiscal buffers are recommended to ensure debt sustainability. The IMF also calls for efforts to ease the funding squeeze for developing and low-income countries and to strengthen the supply side while enhancing resilience to climate change.
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