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27th July 2023 (8 Topics)

Resilient, but just: On the IMF’s economic outlook and lopsided growth


The International Monetary Fund’s latest update to its World Economic Outlook shows lopsided growth that bypasses poor nation’s risks weighing down the global economic pace.

IMF’s prediction:

  • Recovered effects of Bank collapses and instability: The World economy is showing signs of having weathered its most recent challenges, including the bank collapse in the U.S. and Switzerland, and likely poised to expand by 3% in 2023.
  • Slower recovery: As there are still many challenges that cloud around like yet to be resolved issues of U.S. debt ceiling standoff.
  • The heightened debt vulnerabilities: Many frontier economies stressed the urgent need for a concerted global debt resolution initiative to help countries from sliding into debt distress.

Present stance of Developed economies:

  • US & China facing crisis: The two largest economies, the United States and China, have slowed down appreciably and face increased uncertainty amid global and domestic headwinds.
  • Efforts of Cash transfers faded: The pandemic-era cash transfers, made to help families tide over the distress wrought by COVID-19 and the cost-of-living crisis in its aftermath, have all but depleted.
  • Changes in Consumption and demand: China’s downfall of real estate sector, combined with weakening consumption and slumping overseas demand for its exports is concernable.

Matter of concern:

  • On-going Russia-Ukraine war effects: World is still facing the Ukraine-war induced spike in gas prices with momentum decelerating especially in the largest regional economies of Germany and France.
  • Increasing Inflation: Particularly core inflation, remaining well above central banks’ targets, policymakers may be left with little option but to stay the course on inflation-taming but demand-retarding monetary tightening.
  • Global supply chain disruptions: Russia’s termination of the Black Sea grain deal could also push up grain prices, affecting some low-income economies in Africa.
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