The international financial institution, International Monetary Fund yesterday decided to slash down global economic forecasts as high inflation and disruptions in the global supply chain continue to hit developed and developing economies very badly.
World Economic Outlook which is a report published by the international monetary fund two times a year was published on Tuesday in which the organization stated that global economy will grow at a meager rate of 3.2% in 2022. The latest forecast for global economic growth is lesser than the earlier forecast of 3.4 percent. In 2021 the global economy grew at a fast rate of 6 percent. Post-pandemic demand and the rebound of major economies were one of the major reasons for the large growth of the Global Economy in 2021.
High inflation rates and disruptions in the supply chain fuelled by Russian special military operation is assumed to be one of the major reason for slower growth in 2022. The report also noted that the economic slowdown faced by the Chinese economy also has a huge impact on the growth prospects of the global economy.
Despite witnessing a slowdown in covid-19 cases Chinese government has been following and implementing strict measures of lockdown and quarantine which had huge impacts on the domestic economic growth of the Asian giant. Implementation of stringent covid 19 measures also resulted in the stoppage of factories and industries which added to the economic woes of the second-largest economy in the world.
Pierre-Olivier Gourinchas of the international monetary fund said that the data published in the latest World Economic Outlook suggest that the worst is yet to come.
The United States of America had earlier slashed its growth forecasts to 1% percentage for the current year as the Federal Reserve of the United States of America is determined to continue following an aggressive rate hike policy. The central bank has so far hiked the benchmark interest rate multiple times to bring down Inflation under the 2 percent target.
Sanctions imposed by Western economies as an answer to the Russian special military operations in Ukraine triggered a supply chain crisis in the global scenario. The decision of the Russian government to not supply oil and gas to “unfriendly governments” aggravated the economic crisis as oil supply in the international market witnessed huge backlogs. This increased demand and price for energy commodities which triggered high inflation rates in all major economies including the USA, China, Germany, and United Kingdom to name a few.
International Monetary Fund forecasts that inflation in the global economy will peak at 9.1 percent by the end of 2022 and will fall to 4 Percentage levels in 2023. The rate of inflation and chances of global economic recession will largely depend upon the actions taken by central banks who decide when to increase interest rates, and by how much.
