Research Briefing | Oct 13, 2022

Why we think the IMF’s forecast is too optimistic

In our view, the IMF’s recent downgrade of its global GDP growth forecast looks too optimistic. The IMF estimates that global growth in 2023 will be similar to 2019 – soft, but not a disaster – and that a global recession will likely be avoided. By contrast, our forecasts are much weaker and we think the global economy is on the cusp of recession.

What you will learn:

  • The key difference between our outlook and the Fund’s is our assessment of growth in advanced economies. We expect GDP in the US, Canada, and most of Europe to fall next year as squeezed real incomes, higher interest rates, and adverse wealth effects from falling asset and house prices bite. By contrast the IMF expects positive, albeit anaemic, growth in 2023.
  • The consensus view currently sits somewhere between our forecasts and those of the IMF. But it’s worth noting that the latest consensus forecast is based on older vintages and is more likely than not to continue to drift down in the short term.
  • A key point is that while we see a number of economies falling into recession soon, the outlook is perhaps not quite as dire as the currently gloomy commentary might suggest. As well as the widely flagged downsides, we also see upside risks to our assessment of fairly moderate peak-totrough falls in GDP over the coming quarters.
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