The International Monetary Fund said Sunday that the global economic outlook is more bleak than expected last month, pointing to a steady deterioration in purchasing managers’ surveys in recent months.
The fund blamed the bleaker outlook on monetary tightening caused by persistently high and broad inflation, weak growth momentum in China, and persistent supply and food insecurity caused by Russia’s invasion of Ukraine.
The fund last month cut its global growth forecast for 2023 to 2.7 percent from a previous forecast of 2.9 percent. In a blog prepared for the G20 leaders’ summit in Indonesia, he said the latest indicators “confirm that the outlook is more bleak”, especially in Europe.
He added that the recent indicators of purchasing managers that measure the activity of manufacturing and services show the weakness of most of the economies of the Group of Twenty, with the expectation of a contraction in economic activity at a time when inflation is still high.
A worsening energy crisis in Europe would seriously hurt growth and raise inflation, while prolonged high inflation could lead to larger-than-expected increases in interest rate policy and further tighten global financial conditions.
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This in turn poses “rising sovereign debt crisis risks to vulnerable economies,” the IMF said, adding that increasingly extreme weather events would also hurt growth around the world.