The International Monetary Fund has dropped its estimates for 2022 and 2023. In its new World Economic Outlook, the International Monetary Fund has shaved its expectations of worldwide growth for 2022 and 2023. It dropped its estimate for this year to 3.6%, which is 0.8% lower than its previous prediction.
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Reasons for the revision involve, primarily, the war in Ukraine. The invasion by Russia likely will drive inflation to multidecade highs.

What the IMF calls “emerging and developing Europe” will be hit the hardest. This includes Ukraine. Gross domestic product in this region will contract, the forecast shows, by 2.2% this year. “Advanced Europe” will not grow much at all, with the primary threats to German and Italy.

The downward revision for the United States and Canada is based on the lack of a passage of the Biden administration’s stimulus package, decisions by the Federal Reserve to offer less support to the economy and its plan to raise rates, and, finally, sharp inflation. The U.S. revision takes forecast growth down to 3.7%.

Much of the brunt of the downgrade worldwide comes from a sharp drop in the forecast for China, which fell 0.4% from the previous figure to 4.4%. China has not posted growth this slow since the Great Recession.

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If there is a future risk to the IMF forecast, it is that the figures will fall again. Inflation, expected by some economists to level out soon, instead may rise more quickly. This is particularly true of oil prices remaining above $100 a barrel for an extended period. The effects on household budgets could be devastating, particularly for lower-income families.

The IMF will post another outlook this year, and it almost certainly will be even more gloomy.

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