The International Monetary Fund (IMF) has raised its forecast for global economic growth this year as inflation begins to decline around the world.
In a new economic outlook, the IMF said that it now expects the global economy to grow 2.9% this year, which is a 0.2 percentage point improvement from its previous forecast last October.
However, the revised number is still lower than the 3.4% global economic growth seen in 2022. And the IMF warned that higher interest rates and war in Ukraine are likely to still weigh on economic activity this year.
The Washington, D.C.-based agency also revised its projection for global economic growth in 2024 down to 3.1%.
The IMF said its more positive forecast for the year ahead is also due to better-than-expected domestic factors in countries such as the U.S., notably when it comes to consumer spending.
China reopening its economy following strict COVID-19 lockdowns is also expected to contribute to higher global growth in 2023. And a weaker U.S. dollar has improved the prospects of emerging market countries that hold debt in foreign currencies.
In terms of risks to its forecast, the IMF warned that China’s reopening could stall, inflation could remain stubbornly high, Russia’s invasion of Ukraine could further impact energy and food prices, and markets could turn lower on worse-than-expected inflation data.
The IMF calculates that 84% of countries will experience lower inflation this year than in 2022, but they still forecast an average rate of 6.6% in 2023 and 4.3% in 2024.
Most central banks target inflation at an annualized rate of 2%.
