The International Monetary Fund cut its global growth forecast for 2022 due to slowing economic recovery in the US and China as well as the rise in COVID-19 cases and lingering disruptions in the supply chain.
Global GDP, which reached 5.9% last year, has been revised downward to 4.4% this year, the IMF said in its World Economic Outlook report, which was published on Tuesday.
In the fall, the IMF projected that global GDP growth in 2022 would reach 4.9%.
“The global economy enters 2022 in a weaker position than previously expected,” the report said.
The IMF blamed “downside surprises” such as the spread of the Omicron variant and the volatile markets.
The world body also pointed to slowdowns in growth in the US and China.
The US economy is projected to grow at 4% this year — 1.2% lower than the previous IMF forecast.
China’s economy is forecast to grow at a 4.8% clip — down from 5.6% in initial projections.
The IMF said it expects that higher energy prices and the lingering effects of high COVID case counts will hamper growth in countries like Canada, Brazil, and Mexico.
On a positive note, the IMF projects that while inflation will continue well into this year, it should ease “as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.”
The Federal Reserve is likely to announce this week that it will hike interest rates for March — the first of several hikes and other measures put in place to tame soaring inflation.
The IMF says that it expects global growth next year to reach 3.8% — an improvement of 0.2 percentage points compared to its previous forecast.
But it cautioned that the projections could be impacted by unforeseen events like the emergence of a new coronavirus variant and unequal worldwide access to treatments and vaccinations.
“The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective,” the report said.
“The emphasis on an effective global health strategy is more salient than ever.”