The International Monetary Fund released its World Economic Outlook (WEO) update yesterday forecasting a global economic downgrade and persisting challenges to the global economy, as it revised global and South Africa growth.
Global growth was expected to moderate from 5.9 percent in 2021 to 4.4 percent in 2022—half a percentage point lower for 2022 than in the October WEO, largely reflecting forecast markdowns in the two largest economies, China and the US.
South Africa’s gross domestic product estimate was now expected at 1.9 percent for this year, 0.3 percentage point lower than previously forecast, while 2023 estimate was forecast at 1.4 percent. This as Fitch Solutions said it expected growth in South Africa to slow to only 2.1 percent in 2022.
"The global economy enters 2022 in a weaker position than previously expected. As the new Omicron Covid-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US nd many emerging market and developing economies, it said. .
It flagged that elevated inflation was expected to persist for longer than envisioned in the October WEO, with ongoing supply chain disruptions and high energy prices continuing in 2022.
Monetary policy in many countries would need to continue on a tightening path to curb inflation pressures.
Fiscal policy—operating with more limited space than earlier in the pandemic—would need to prioritise health and social spending while focusing support on the worst affected. In this context, international cooperation would be essential to preserve access to liquidity and expedite orderly debt restructurings where needed, The IMF said.
philippa.larkin@inl.co.za
BUSINESS REPORT ONLINE