BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/30

In its latest World Economic Outlook (WEO) released this week, the IMF predicts the global economy growing by 3.2 %, a significant reduction from last year’s 6.1 % growth. In the initial estimates released in January, the IMF had been expecting 4.4 % global growth this year, so the predictions have been significantly lowered during the spring. The growth estimates for emerging economies are slightly higher than for other countries, but variations in growth percentages are noticeable. The IMF now expects China’s 2022 GDP growth to come in at 3.3 %, India’s at 7.4 % and Russia’s economy is expected to contract at a rate of 6 %. The growth figures are overshadowed by the gloomy economic outlook caused by the spread of covid, war in Ukraine and the ongoing inflation.

The April WEO already cut growth by 0.4 percentage points from the January figure, which was 4.8 %. The new WEO cuts the predicted growth for China this year by an entire percentage point compared to April with the estimate now being 3.3 %. Early in 2022, before the covid situation worsened in China, the growth forecasts for most institutional forecasters were significantly higher, running in the range of 4–6 % (BOFIT Weekly 4/2022). Following covid lockdowns and economic contractions in the spring, all major institutional forecasters have reduced their forecasts for China. GDP growth is now generally expected to remain in the range of two to four percent this year.

The Russian economy is still expected to contract sharply this year, but slightly less than expected at the outbreak of the Ukraine war. The IMF’s latest forecast lifts its previous estimate by over two percentage points from the April WEO. Among the investment banks, JPMorgan this month raised its previous forecast from a contraction of 5 % this year to just 3.5 %. Much of the reduction in the Russian decline reflects rising oil prices and persisting demand for Russian oil. Additionally, Russia’s labour markets have remained stable and private consumption has remained relatively strong. According to forecasters, war and sanctions will continue to affect the Russian economy next year and the contraction in GDP, albeit more modest, will continue.

India stands out as a country with one of the highest growth predictions for the year. The GDP growth projections for this year are around 7 % according the IMF, OECD and various investment banks. While India’s high growth seems locked in, forecasters have lowered their estimates by several percentage points throughout this year. In January, the IMF predicted India’s growth will reach 9 % and the World Bank estimated growth of 8.3 %. Expectations of India’s future growth are slightly more modest, with most forecasters putting India’s 2023 GDP growth estimates in the range of 4–6 %.

2022 GDP forecasts released this spring and summer generally see Russia’s GDP contracting, China’s growth slowing and India showing high GDP growth predictions.

Sources: IMF, World Bank, OECD, Fitch, BOFIT, JPMorgan, Goldman Sachs, ADB and Nomura.

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