2 February 2024

Economist John Lipsky and IMF Managing Director Kristalina Georgieva in Washington on April 11, 2023.

Global growth is slowing, with increasingly uncertain economic conditions on the horizon. In its latest forecasts, published on Tuesday April 11, the International Monetary Fund (IMF) estimates that it should not exceed 2.8% in 2023, against 3.4% in 2022. The slowdown is more pronounced in the advanced economies, particularly in the euro zone, where growth is dropping, dropping from 3.5% in 2022 to 0.8% expected in 2023.

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The United Kingdom and Germany are expected to be among the only countries in the world to record a contraction in their gross domestic product (GDP) – respectively – 0.3% and – 0.1% – this year. Even Russia’s economy, although under sanctions, should do better, with a 0.7% increase in its GDP. On April 6, the head of the IMF, Kristalina Georgieva, was hardly optimistic, declaring that global growth over the next five years would be around 3%, “our weakest medium-term outlook since 1990”.

China should drive global growth, with an expected increase in its GDP of 5.2% in 2023, before a sharp slowdown to 4.5% in 2024. But it is inflation that particularly holds the attention of the IMF. And for good reason: it is slowing more slowly than expected, despite a sharp rise in interest rates around the world. It should remain at 7% in 2023, compared to 8.4% in 2022. This is twice as high as before 2021, and well beyond the objectives that all the affected countries had set themselves. In Europe, price increases should exceed 10% this year (5.3% for the euro zone), after +15.4% in 2022 (+8.4% in the euro zone).

The risk of “socio-political instability”

Even though food and drink prices have only increased by 1.3% since August 2022 on the planet, according to IMF calculations, they remain 22.3% above the average of the last five years. years, and 39.1% higher than before the Covid-19 pandemic.

“Rising food prices can have an impact on public finances and the balance of payments”, warns the financial rating agency Moody’s in a note published on Tuesday 11 April. In fact, in poor and emerging countries, food price subsidies represent a significant share of public spending. Iraq, for example, devoted 1.1% of its GDP to it in 2022. However, with the increase in the debt burden, which has pushed two-thirds of low-income countries to the brink of payment default, their budgetary leeway is now limited.

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