Research Briefing | Apr 11, 2023

The IMF’s GDP growth forecasts are still too optimistic

The IMF’s forecast still looks too optimistic over the next 2 years in our view. The impact of bank funding turmoil looks to have been offset in their forecasts by the positive developments in European energy markets, solid economic momentum and China’s earlier than expected reopening, to leave the IMF’s global GDP projection broadly unchanged.

What you will learn:

  • But we think their forecasts underestimate the impact that tightening in financial conditions will have on advanced economies in second half of this year and next. Our latest global forecast – to be published tomorrow – is more downbeat this year and next. We expect growth in PPP terms of 2.3% this year and 2.8% next, which is weak by historical standards. This equates to 1.9% and 2.2% respectively on a constant exchange rates basis – our preferred measure of global activity.
  • A key difference in our thinking seems to be that we expect more of an economic impact from tighter financial conditions in advanced economies than the IMF. Consequently, our 2024 forecasts for GDP growth in the US, Canada and the eurozone are more cautious.
  • With the fallout from bank funding turmoil still to be fully realised, we maintain the view that there are substantial downside risks to our forecast. The IMF appears to agree, assigning a 25% probability that global growth will fall below 2% in 2023.
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