IMF lifts growth forecast, but economic challenges persist

The International Monetary Fund (IMF) upgraded its forecast for global growth in a new report published on Tuesday, July 25, raising its 2023 forecast from the 2.8% assessed in April to 3.0%.

The IMF attributed the slight uptick in growth to a resilient service sector, and strong labor markets in the first quarter. The IMF also said inflationary pressures and stress on the banking sector are subsiding.

However, the latest World Economic Outlook predicts global GDP growth will remain flat, hovering around 3% into 2024, as risks to the global economy persist. The numbers for 2023 and 2024 remain sluggish compared with overall economic growth of 6.3% in 2021, and 3.5% last year.

And although global inflation has cooled down after hitting record levels in the US and Europe, consumer prices globally are still forecast to increase by 6.8% in 2023, compared with pre-pandemic levels averaging 3.5%

"We're on track, but we're not out of the woods," IMF chief economist Pierre-Olivier Gourinchas told Reuters news agency.

"What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID."