Inflation will likely slow over the next two years, the International Monetary Fund (IMF) said in its world economic outlook report.
The report said: "Global inflation is expected to fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024."
The fund did not expect global GDP to shrink, and IMF chief economist Pierre-Olivier Gourinchas said that "we're well away from any sort of global recession marker."
Growth expected to fall
Global economic growth is predicted to fall from 3.4% in 2022 to 2.9% in 2023, and then rise to 3.1% in 2024, the IMF said.
"The rise in central bank rates to fight inflation and Russia's war in Ukraine continue to weigh on economic activity," the report said.
"Global conditions have improved as inflation pressures started to abate," Gourinchas said at a news conference in Singapore. "The road back to a full recovery with sustainable growth, stable prices and progress for all has only started."
"Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption, and also business investment," said Gourinchas.
The IMF said that although the spread of COVID-19 in China dampened growth in 2022, "the recent reopening has paved the way for a faster-than-expected recovery." China lifted most of its COVID-19 restrictions late last year.
The organization noted that the world economy still faces serious risks, including Russia's war against Ukraine, potential future waves of COVID-19 infection in China and high interest rates leading to crises in countries saddled with considerable debt.
The fund called for the strengthening of debt restructuring frameworks, suggesting it believes some countries are likely to at least struggle to service their debts without preventive measures.
It also appeared in its report to chide governments for trying to alleviate economic pressures with overly generalized measures that ran the risk of fueling inflation.
"Fiscal support should be better targeted at those most affected by elevated food and energy prices, and broad-based fiscal relief measures should be withdrawn," the IMF said.
EU and Russia show resilience; British economy to shrink
The report indicates that Russia's economy has proven more resilient to sanctions and other fallout from the war in Ukraine than expected. The IMF predicted growth of 0.3% in 2023, compared to a contraction of 2.2% the previous year. In October, the IMF had predicted a 2.3% contraction for Russia in 2023.
The IMF predicted that Germany and Italy would avoid recessions this year, with European growth being "more resilient than expected" despite the effects of Moscow's invasion of Ukraine.
The fund predicted that the UK's economy will shrink by 0.6% in 2023, compared to growth of 0.3% it had predicted in October. The British economy is being negatively impacted by higher interest rates and tighter government budgets.
"These figures confirm we are not immune to the pressures hitting nearly all advanced economies," Chancellor of the Exchequer Jeremy Hunt said in response to the IMF forecast. "Short-term challenges should not obscure our long-term prospects — the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years."
