IMF revises China's 2022 growth by 1.1%, predicts major global spillovers

The International Monetary Fund (IMF) said on Tuesday that it has revised downwards its forecast for China's economic growth by 1.1 per cent in 2022 and by 1.3 per cent next year.

"In China, further lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1 percentage points, with major global spillovers," the IMF said in its updated World Economic Outlook report.

The IMF downgraded China's growth to 3.3 per cent in 2022, the lowest level in more than 40 years, and to 4.6 per cent in 2023, a half-percent lower than it was in the previous outlook in April, the report said.

This forecast comes as the IMF report has predicted that global growth will decrease to 3.2 per cent this year and further to 2.9 per cent in 2023.

"The baseline forecast is for growth to slow from 6.1 per cent last year to 3.2 per cent in 2022, 0.4 percentage points lower than in the April 2022 World Economic Outlook," the report said.

In 2023, the IMF projects global growth to be 2.9 per cent, 0.7 percentage points lower than it projected in April's World Economic Outlook, the report added.

On the inflation front, the IMF has revised upwards its forecast for global inflation to 6.6 per cent in the world's advanced economies and 9.5 per cent in the emerging markets in 2022.

"Global inflation has been revised up due to food and energy prices as well as lingering supply-demand imbalances, and it is anticipated to reach 6.6 per cent in advanced economies and 9.5 per cent in emerging markets and developing economies this year - upward revisions of 0.9 and 0.8 percentage points, respectively," the IMF said.

The IMF said in the report that it expects disinflationary monetary policy to "bite" next year, with global output growing by a modest 2.9 per cent. Inflation is projected to be 3.3 per cent in the advanced economies and 7.3 per cent in the developing ones in 2023, the report said.

According to IMF, a tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize. Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while US consumer spending undershot expectations.

"Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide--especially in the United States and major European economies--triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine," the report added.