BusinessThe 3 most imminent challenges facing the world economy, according to the...

    The 3 most imminent challenges facing the world economy, according to the International Monetary Fund

    The post-pandemic global economy faces key challenges, according to the International Monetary Fund (IMF).

    The multilateral organization presented this Tuesday an update of its latest report on “World economy perspectives” and pointed out that countries continue to gradually recover from the covid-19 health crisis and the impact of Russia’s invasion of Ukraine.

    “However, many challenges still cloud the horizon and it is too early to celebrate,” IMF chief economist Pierre-Olivier Gourinchas wrote in a note.

    According to the IMF, there are three aspects that countries should focus on.

    On the one hand, he indicated that the global economy will grow less in 2023 and 2024 than in 2022: it will go from 3.5% to 3.0% in both years.

    “Signs are growing that global activity is losing momentum,” Gourinchas said, partly because of tightening monetary policies in the fight against inflation.

    Despite raising the growth forecast for this year by 0.2 percentage points compared to the forecast made in April, the agency stressed that “remains weak” compared to the average for this century, of 3.8%.

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    This lower growth is mainly explained by the performance of developed economies, where growth will fall from 2.7% in 2022 to 1.5% in 2023.

    In contrast, the emerging countries will accelerate their growth rate from 3.1% last year to 4.1% this year and next.

    The latter is due to the strength of the Asian economies, especially China and India.

    Latin America and the Caribbean, however, will see a stronger drop than the world average according to IMF forecasts, from 3.9% in 2022 to 1.9% in 2023 and 2.2% in 2024.

    “Many producers of raw materials will suffer a decrease in export earnings,” explained Gourinchas.

    The second challenge is further reduce inflation.

    Although the increase in consumer prices left behind the maximum registered last year -8.7% in the world average- and this year the agency expects it to be located at 6.8%, underlying inflation (which does not take into account volatile products such as food and energy) “will decrease more gradually”.

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    “More worrisome, core inflation in advanced economies is expected to remain unchanged at an annual average rate of 5.1% this year, before declining to 3.1% in 2024. Clearly, the battle against inflation is not yet won.“said the chief economist.

    The IMF said it should have revised its inflation forecast for 2024 upwards.

    The third challenge posed to the countries by the international organization is ensure financial stabilityafter having successfully overcome the turbulence in some banking institutions in the United States and Switzerland in the first months of the year.

    “Therefore, central banks should continue to focus on restoring price stability and strengthening financial supervision and risk control,” the IMF said in its report.

    The report also states that “fiscal buffers should be built, with the composition of the fiscal adjustment ensuring specific support for the most vulnerable.”

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    Beyond the yellow lights pointed out by the IMF, Gourinchas stressed that a relevant indicator for people will evolve favorably.

    Over the past few years, wage growth has not kept pace with inflation – by the world average – and while labor markets have been strong, with high employment rates and low unemployment, this has resulted in lower labor costs.

    “If labor markets remain strong, we should wait and welcome real wages recover lost groundGourinchas said.

    The chief economist said that means nominal wage growth will remain strong for a while. “Indeed, the gap between the two has started to close,” he added.

    “I remain confident that there is room to accommodate the rebound in real wages without triggering a wage-price spiral,” he estimated.

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    Source: La Opinion

    This post is posted by Awutar staff members. Awutar is a global multimedia website. Our Email: [email protected]


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