Better Prognosis for Russia
By 0.8 percentage points, the IMF has improved the forecast for Russia. This is a reflection of changes in the hard data, which indicate a very strong first half of the year (on retail sales, building, and industrial production). According to the IMF’s assessment of the state of the Russian economy, significant fiscal support is aiding positive development there. Despite Russia still being at war with Ukraine, the Russian economy is doing far better than anticipated. The Monetary Fund has increased its prediction for this year’s economic growth in the Russian Federation from 0.7 percent to 1.5 percent. It kept its 1.3 percent growth prediction for the coming year.
China’s Recovery from the Pandemic
The IMF, on the other hand, did not alter its evaluation of China. The Chinese economy is expected to rise by 5.2 percent this year and 4.5 percent next year, according to forecasts. The pace at which the global economy is recovering from the pandemic and the impact of the war in Ukraine is diminishing, according to analysts at the Monetary Fund. Inflation is expected to decline, however, more slowly than the Monetary Fund had anticipated in the spring. The Monetary Fund modified its prediction, stating: “We expect headline global inflation to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and to 5.2 percent in 2024.
Last year, the Chinese GDP grew by 3%. The Fund primarily draws attention to the ongoing issues facing the Chinese real estate market, but it also highlights weakened consumer demand and decreased tax revenue. According to the Monetary Fund, China’s issues might also be felt internationally.
Inflation Decline
When compared to the long-term average, the IMF deems the three percent growth as poor. In many countries throughout the world, persistent inflation and high interest rates are barriers to a more dramatic improvement. Global inflation is projected to decline from 8.7% last year to 6.8% this year, a 0.2 percentage point downward revision, and 5.2% in 2024. The growth in advanced economies will fall from 2.7% in 2022 to 1.5% this year. The euro area will decelerate sharply.
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With inflation beginning to fall, we should be nearing the end of the inflationary cycle that began in 2021. Inflation risks are now more balanced, and most major economies are less likely to require additional large policy rate hikes. Some Latin American economies’ interest rates have already peaked. After years of significant fiscal support in many countries, it is now time to gradually restore fiscal buffers and return debt dynamics to more sustainable levels.
Twice a year, in the spring and the fall, the IMF publishes a report on the state of the world economy. The fall outlook update is released in January, while the spring outlook update is released in July.
