By BUUMBA CHIMBULU
MONETARY policy in many countries will this year need to continue on a tightening path to curb inflation pressures, as China’s ongoing retrenchment in real estate sector and slower-than-expected recovery of private consumption limits global growth prospects.
This is according to the International Monetary Fund’s (IMF) World Economic Outlook released this month.
According to the report, international cooperation would, in this context, be essential to preserve access to liquidity and expedite orderly debt restructurings where needed.
It also stated that investing in climate policies remained imperative to reduce the risk of catastrophic climate change.
“Monetary policy in many countries will need to continue on a tightening path to curb inflation pressures, while fiscal policy – operating with more limited space than earlier in the pandemic – will need to prioritise health and social spending while focusing support on the worst affected,” the outlook stated.
Meanwhile, the report stated that the global economy entered 2022 in a weaker position than previously expected.
It projected that global growth was expected to moderate from 5.9 percent in 2021 to 4.4 percent in 2022, half a percentage point lower for 2022 than in the October World Economic Outlook, largely reflecting forecast markdowns in the two largest economies.
“Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies.
“The ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects,” according to the outlook. The outlook stated that in China, pandemic-induced disruptions related to the zero-tolerance Covid-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade.
According to the report, global growth was expected to slow to 3.8 percent in 2023.
“Although this is 0.2 percentage point higher than in the previous forecast, the upgrade largely reflects a mechanical pickup after current drags on growth dissipate in the second half of 2022.