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The global economy has lost momentum due to the effect of emerging interest rates, the invasion of Ukraine and growing geopolitical divisions, and now faces new uncertainty akin to the war between Israel and Hamas militants, the International Monetary Fund warned on Tuesday. .
The IMF said it expects economic expansion to slow to 2. 9% in 2024 from 3% forecast this year. The forecast for next year is lower than the 3% forecast in July.
This slowdown comes at a time when the world has yet to fully recover from the devastating but brief recession caused by COVID-19 in 2020 and is now likely to suffer the consequences of the shock in the Middle East, specifically on oil prices.
A series of larger shocks, in addition to the pandemic and Russia’s war in Ukraine, have reduced global economic output by about $3. 7 trillion over the past three years to pre-pandemic trends.
“The global economy is limping, not running,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told a press convention at the organization’s annual meeting in Marrakech, Morocco.
The IMF’s expectations for a 3% expansion this year are lower than 3. 5% in 2022, but unchanged from its July projections.
It is “too early” to assess the effect on global economic expansion of the multi-day war between Israel and the Palestinian militant organization Hamas in Gaza, Gourinchas said. He said the IMF was “closely monitoring the situation” and noted that oil costs had risen about 4% in recent days.
“We have noticed this in past crises and conflicts. And, of course, this reflects the threat of disruption to oil production or transportation in the region,” he said.
If maintained, a 10% increase in oil costs would reduce global economic expansion by 0. 15% and increase global inflation by 0. 4%, Gourinchas said.
“But I insist once again that it is too early to jump to conclusions,” he added.
So far, the rise in oil costs has been “quite moderate,” said Carsten Fritsch, a commodity analyst at Commerzbank. He pointed to the lack of statements for Hamas by major oil producers Saudi Arabia, the United Arab Emirates, Kuwait and Iraq. , so they are unlikely to limit the source as a reaction to the war.
So far, the global economy has shown “remarkable resilience,” Gourinchas said, at a time when the U. S. Federal Reserve and central banks around the world have aggressively raised interest rates to combat a resurgence in inflation.
These increases have helped ease price pressures without putting many other people out of work. That combination, he said, is “increasingly consistent” with what’s known as a soft landing: the concept that inflation can be contained without causing a recession.
The IMF forecasts that global consumer value inflation will fall from 8. 7% in 2022 to 6. 9% this year and 5. 8% in 2024.
The United States stands out in the IMF’s latest World Economic Outlook, published before the outbreak of the war between Israel and Hamas. The IMF has raised its growth forecast for the United States this year to 2. 1% (corresponding to 2022) and 1. 5% in 2024. (a sharp increase from the 1% forecast in July).
The United States, an energy exporter, has not been hit as hard as countries in Europe and elsewhere by emerging oil prices, which soared after Russia’s invasion of Ukraine last year and have spiked more recently due to Saudi Arabia’s production cuts. willing to spend the savings they have accumulated during the pandemic.
The situation is bleaker in the 20 countries that have a share of the single currency and are most exposed to emerging energy prices. The IMF has reduced the eurozone’s expansion to 0. 7% this year and 1. 2% in 2024. In fact, it expects the German economy to contract by as much as 0. 5%. % this year before returning to a 0. 9% expansion next year.
This is even lower than the Russian economy, where the IMF forecasts an expansion of 2. 2% this year before falling to 1. 1% next year.
The economy of China, the world’s second-largest, is expected to grow 5% this year and 4. 2% in 2024, lower than the IMF’s July forecast.
China’s economy was expected to recover this year after the communist government ended the draconian “zero-Covid” lockdowns that crippled expansion in 2022. But the country is grappling with disruptions similar to its oversized housing market.
The IMF reiterated its fear that the world’s countries are splitting into geopolitical blocs that could simply restrict foreign industry and global economic growth.
The U. S. and its allies have imposed unprecedented sanctions on Russia over its invasion of Ukraine and sought to rely less on Chinese imports as tensions with Beijing rise.
The IMF noted that last year, countries imposed about 3,000 new industrial restrictions, up from fewer than 1,000 in 2019. It forecasts foreign industry expansion of just 0. 9% this year and 3. 5% in 2024, well below the 2000-2019 annual average. 4. 9%. %.