IMF growth forecasts and global economic outlook

Global economic growth… It’s no secret that the global economy is suffering today. The global economic slowdown, which started with the pandemic, has evolved into a trend of economic contraction with high inflation rates around the world. It can easily be said that the Russia-Ukraine crisis has seriously damaged the global economy. According to IMF World Economic Outlook (July 2022) forecasts, growth is expected to decline from 6.1% in 2021 to 3.2% in 2022. Therefore, this estimate is lower than the April 2022 Outlook. More strikingly, the report predicts that growth will decline further to 2.9% in 2023. In addition, it can be said that global economic growth expectations have decreased rapidly.

Growth details in the IMF report… Another reason why the IMF predicts slower economic growth is tighter monetary policy and labor market expectations. According to the report, it will be more difficult to reduce inflation if the labor market is tighter than expected. Also, tighter monetary policy will definitely have economic costs that slow down economic growth. However, it is inevitable for countries to implement tighter monetary policies in order to improve their living standards and the global economy. Therefore, the estimates are unfortunately plausible, as high inflation and tighter monetary policies cause economic growth to slow down. According to the IMF, reducing inflation as much as possible should be the first priority of countries in order to save their citizens from the already low living standards.

According to the report, the performance of the world economy in 1Q22 exceeded expectations. Therefore, it can be said that the effect of the pandemic is no longer evident. However, it is also reported that real GDP suffered in 2Q22 for the first time since 2020. The reasons for this are not surprising, according to the report, due to the economic downturn of Russia and China. Looking at the countries by categorization, there is no country among the developed economies that has the IMF’s economic growth expectation. In fact, every country on the list of advanced economies is predicted to have a decline in economic growth, with the exception of Japan, which is predicted to stay the same. On the other hand, developing countries are expected to grow from 2022 to 2023 on average. However, they are not expected to return to 2021 levels. Also, there are countries like India in the categories that the IMF predicts continued slower economic growth. Russia is expected to have negative economic growth in 2022.

Turkey… As for Turkey, the IMF first predicted 2.7% real growth for 2022 in its April issue. However, in the July issue, the IMF revised its 2022 forecast to 4% from 2.7%. In addition, the 2023 projections were adjusted from 3% to 3.5%. Thus, Turkey is projected to have slower economic growth, from 11% in 2021 to 4% in 2022 and 3.5% in 2023, although this exceeds initial estimates. So, although Turkish ministers brag about it, the figures are not optimal as there is still a decline in economic growth. Also, as recommended to other countries in the same profile, Turkey urgently needs to focus on disinflationary monetary policies and thus reduce inflation as much as possible in order to improve living standards, which are now very problematic.

Conclusion? There is a very serious recession warning in the IMF’s current World Economic Outlook assessments. The slowdown in economic growth this year and next year will bring serious problems. Inflation experienced above expectations in the US and leading European economies brought along very tight monetary policy practices by central banks. In addition, the re-emerging Covid epidemic cases in China and the additional restrictions imposed, and finally the Ukraine crisis, left the global economy in inextricable problems. The world’s top priority should be to suppress inflation. But this struggle could have serious consequences, such as a global recession.

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