The largest reduction among major economies was for South Africa, seen growing just 0.1%, down 1.1 percentage point from the previous estimate.
The unexpected failures last month of Silicon Valley Bank and Signature Bank and the collapse of Credit Suisse Group AG roiled markets and ignited financial-stability concerns, complicating central banks’ quest to tame inflation while maintaining growth and the health of the banking system. While the reduction in the 2023 forecast isn’t large, the report showed the IMF is more subdued about the outlook than in January, when it saw this year as a"turning point" for the global economy and risks were more balanced.
The fund sees the global inflation rate at 7% this year, 0.4 percentage point higher than the January projection, though down from 8.7% in 2022. The slowdown stems from declining commodity prices and the impact of interest-rate increases. For most countries, the pace of price growth will remain above central bank objectives until 2025.
In one scenario, which it calls a"plausible alternative," financial instability remains contained but impacts conditions more than in the IMF’s base case and banks reduce lending. That would cause growth to slow to 2.5% in 2023, the weakest pace since 2001, excluding the first year of the Covid-19 pandemic in 2020 and the global financial crisis of 2009.
The fund raised its 2023 growth forecast for advanced nations marginally to 1.3%, 0.1 percentage point higher than previously foreseen, boosted by strong labour markets. But that’s less than half the 2.7% expansion in 2022.