IMF and World Bank highlight fragile state of global economy

IMF and World Bank highlight fragile state of global economy

Good evening,

The IMF’s Fiscal Monitor is the final in a flurry of reports from both the fund and the World Bank highlighting the fragile state of the global economy as it struggles with the lingering effects of the pandemic and the shock of war in Ukraine.

Today’s instalment points out the “narrowing fiscal space” faced by governments and the likelihood that any short-term benefit to public finances from higher inflation will soon disappear under the pressure of higher food and energy prices alongside rising interest rates.

The IMF now expects global prices to rise 7.4 per cent this year, much higher than the 3.2 per cent it forecast in late 2020.

In its World Economic Outlook published yesterday, the fund cut its global growth forecast for this year to 3.6 per cent, down 0.8 points since its January projections and a sharp fall from its estimated total for 2021 of 6.1 per cent.

Risks had “worsened significantly” from the war in Ukraine, it said, putting paid to the idea that this year would see a stronger recovery from the pandemic. On Monday, the World Bank also cut its global growth forecast from 4.1 per cent to 3.2 per cent.

A potential embargo on Russian oil