The global economy is facing its weakest medium-term growth in over 30 years, according to the International Monetary Fund (IMF). This is due to geopolitical fragmentation, slower labour force growth, and weaker prospects for previously fast-growing economies like China.
The IMF’s latest World Economic Outlook expects global growth to be around 3% in 2028 – the lowest medium-term forecast in an IMF report since 1990. Higher interest rates have led to a cooling of economic activity, and the IMF has also slightly trimmed its 2023 global growth outlook.
In other news, U.S. inflation has slowed to its lowest level in nearly two years, but rents have kept underlying inflation pressures simmering, which could lead to the Federal Reserve raising interest rates again next month. Meanwhile, jobless claims in the US have increased more than expected.
Wages in Japan have declined for the 11th straight month, by 2.6% in February, when adjusted for inflation, putting pressure on the central bank’s new governor to end Japan’s ultra-loose monetary policy. Ukraine’s GDP fell by 29.1% in 2022 due to Russia’s invasion, and Moody’s Investors Services warns that several Sub-Saharan African countries are facing a debt repayment crisis due to soaring food prices.
The European Commission is drafting new plans to better protect taxpayers from bank failure, while the Asian Development Bank forecasts faster economic growth in Asia this year, driven by China’s recovery from the pandemic and strong demand in India.
At the IMF and World Bank Spring Meetings, discussions and action plans focused on financing an energy transition that is equitable for emerging markets and fast enough to maintain the Paris Agreement goals. Investment of $4 trillion to $6 trillion annually is needed by 2030 to meet these twin goals.
This week’s Agenda also explores how many European countries are creating favourable environments for fast-growing technology companies through investment plans and funding programs, and an economics lecturer argues that the global economy is entering a period of permanently higher inflation fuelled by deglobalization, climate change, a wage-price spiral, and highly liquid global markets. #
