The world economy will cope better than initially feared with the shocks from the war in Ukraine and high inflation, the International Monetary Fund said as it upgraded its forecast.

The global growth outlook for 2023 was revised up by 0.2 percentage points to 2.9%, the IMF said in its World Economic Outlook update, released on Tuesday.

While this is weaker than the 3.4% recorded in 2022, IMF Chief Economist Pierre-Olivier Gourinchas said growth of 2.9% in 2023 would be “less gloomy” than had been assumed in the October forecast.

The IMF does not expect the global economy to slip into recession – an option economists had not ruled out late last year.

This is due to “positive surprises” and “unexpectedly high levels of resilience” in multiple economies, the IMF report said, citing China’s shift away from its zero-Covid strategy as a potential driver for global growth.

However, the report also lists multiple risks that would cause the economic situation to deteriorate: a worsening of the Covid-19 situation in China, an escalation of the Russian invasion of Ukraine and a debt crisis due to the tight monetary policy of central banks.

For the eurozone, the IMF forecasts growth of 0.7% this year – 0.2 percentage points higher than previously assumed. In Germany, gross domestic product (GDP) is expected to grow by just 0.1% in 2023 – although this is an increase of 0.4 percentage points on the previous estimate. Next year, the German economy is then expected to grow by 1.4% – 0.1 percentage points less than previously assumed.

Global growth of 3.1% is anticipated for 2024.

Source: dpa/MIA