The International Monetary Fund said Tuesday that global growth is forecast to fall to 2.8 percent in 2023, down 0.1 percentage point from the previous projection in January, as many countries still struggle with the fallout from the spread of COVID-19 variants and Russia's war on Ukraine.
The forecast was revised also because higher interest rates meant to tame inflation are now putting a damper on economic growth, the IMF said. It compares with an estimated 3.4 percent last year.
"A return of the world economy to the pace of economic growth that prevailed before the bevy of shocks in 2022 and the recent financial sector turmoil is increasingly elusive," the Washington-based agency said in its updated outlook report, released to coincide with its and the World Bank's annual spring meetings.
The forecast of 2.8 percent, stated in the World Economic Outlook report, is based on the assumption that the financial sector turmoil recently triggered by U.S. regional bank failures and the demise of Credit Suisse is contained, and does not tip into a broad recession.
The IMF said that about 90 percent of advanced economies are expected to see a fall in growth this year. As a result, it added they are likely to face higher unemployment rates -- a rise of 0.5 point on average from 2022 to 2024.
Global inflation is projected to decline from 8.7 percent in 2022 to 7 percent this year and 4.9 percent the following year. However, it said the pace is slower than initially expected.
Japan's growth projection stands at 1.3 percent, revised down from 1.8 percent in January, with an IMF official attributing the deterioration to the country's weaker-than-expected economic performance in the fourth quarter of 2022, saying sluggish business investment especially had a "knock-on effect."
Daniel Leigh, division chief of the IMF's research department, said at a press briefing that there is also "some uncertainty connected with the volatility of the yen," while noting that Japan's inflation rate is still "very low by international standards."
Among major economies, U.S. growth is forecast at 1.6 percent, up 0.2 point from the earlier projection. Growth in the euro area is also anticipated to rise by 0.1 point to 0.8 percent.
China's growth forecast remains unchanged at 5.2 percent, with the IMF noting that its economic reopening from strict lockdown measures will likely continue this year.