The IMF’s five-year forecast for global economic growth is the worst since 1990

The world economy in the next five years will grow by an average of 3% annually, the International Monetary Fund expects. The IMF’s medium-term outlook is the weakest since 1990, said Fund Managing Director Kristalina Georgieva, transmits Bloomberg. The document will be published on April 11.

At a conference in Washington, Georgieva said global GDP will expand by less than 3% in 2023, in line with the IMF’s January forecast of 2.9%, but below the five-year average of 3.8% over the past 20 years.

According to the head of the IMF, the growth of the world economy will be constrained by high interest rates. 90% of advanced economies will face a slowdown in growth this year due to a slowdown in economic activity in the US and the eurozone amid tightening monetary policy. At the same time, due to persistently high inflation, countries should continue to raise interest rates to reduce pressure on the financial system, she said. If the banking system becomes unstable, policy makers will have to choose between protecting it and high inflation, Georgieva added.

Another reason the head of the IMF called the conflict in Ukraine and the growing geopolitical tensions, in which, given high inflation, “a sustainable recovery remains elusive.”

Earlier, the IMF warned that the fragmentation of the global economy into opposing blocs could reduce global GDP by 0.3 to 2.3% over a 7–10 year horizon, depending on how severe the split is. The IMF experts identified five fragmentation scenarios: “strategic separation”, “geo-economic fragmentation”, as well as three additional ones that are implemented in the event of severe restrictions on trade in energy resources, high-tech products or agricultural goods. The first two options are considered the main ones in the fund.

At the end of March, the World Bank introduced a report that states that by 2030 the global economic growth rate will decline to the lowest levels in 30 years. The organization said the economy is facing a “lost decade”. They expect that the average potential GDP growth will fall by about a third compared to the pace that prevailed in the first decade of this century, to 2.2% per year.

In December 2022, Bank of Russia Governor Elvira Nabiullina notedthat the Central Bank still sees “risks of a more significant cooling of the global economy” than it is in the baseline scenario. According to the Central Bank, in 2023 the dynamics of the country’s GDP will be in the range from minus 1% to plus 1%. At the same time, the Ministry of Economic Development believes that by the end of 2023, Russia’s GDP will decrease by 0.8%, and in 2024 the growth of the Russian economy will be 2.6%.