IMF: Expect global growth to bottom out this year: IMF’s Gita Gopinath at Davos

The global growth is likely to bottom out this year owing to surging global inflation levels and spillovers from war, reported ET Now citing IMF’s Gita Gopinath on Wednesday.

Gopinath warned that the global economy may face a tough year ahead because of the uncertainties around the world. The economy is still undergoing recovery from climate shocks and Covid-19 pandemic.

“It is important for monetary policy to stay the course and maintain restrictive policies to bring down inflation durably and for fiscal policy to provide support to the most vulnerable in society,” she said.

The headline inflation may have peaked but sectors like services are still trending up in some countries which may hamper the global growth.

“We are in Davos and if I were to describe the IMF’s outlook for 2023 in one line, it would be that we have a tough year ahead, but there are signs of resilience. A tough year, because we still have high levels of inflation around the world, even though it has been coming down in the last few months, tough year because we still have the war and its spill-overs to the rest of the world and we still have shocks from climate and from the pandemic going around the world,” she said.

She cautioned against growing fragmentation globally, saying it may hurt the global growth rate.

Gopinath said the new IMF forecasts for the global economy, due at the end of the month, will be “in the ballpark of what we put out in October.”Taking into consideration the signs of resilience with strong labour markets in some of the major economies like the US and Europe, Gopinath sees the consumption holding up.

She said global growth could improve towards the second half of this year and into 2024.

“After going through about three rounds of downgrades at least we don’t have a worse outcome we’re looking at this time around,” said Gopinath.