The International Monetary Fund said on Monday that it expected the global economy to slow this year as central banks continued to raise interest rates to tame inflation, but it also suggested that output would be more resilient than previously anticipated and that a global recession would probably be avoided.

The IMF upgraded its economic growth projections for 2023 and 2024 in its closely watched World Economic Outlook report, pointing to resilient consumers and the reopening of China’s economy as among the reasons for a more optimistic outlook.

The fund warned, however, that the fight against inflation was not over and urged central banks to avoid the temptation to change course.

“The fight against inflation is starting to pay off, but central banks must continue their efforts,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said in an essay that accompanied the report.

Global output is projected to slow to 2.9 per cent in 2023, from 3.4 per cent last year, before rebounding to 3.1 per cent in 2024. Inflation is expected to decline to 6.6 per cent this year from 8.8 per cent in 2022 and then to fall to 4.3 per cent next year.

After a succession of downgrades in recent years as the pandemic worsened and Russia’s war in Ukraine intensified, the IMF’s latest forecasts were rosier than those the fund released in October.

Since then, China abruptly reversed its “zero Covid” policy of lockdowns to contain the pandemic and embarked on a rapid reopening. The IMF also said that the energy crisis in Europe had been less severe than initially feared and that the weakening of the US dollar was providing relief to emerging markets.

The IMF predicted previously that a third of the world economy could be in recession this year. However, Gourinchas said in a news briefing ahead of the release of the report that far fewer countries were now facing recessions in2023. “We are seeing a much lower risk of recession, either globally, or even if we think about the number of countries that might be in recession,” Gourinchas said.

Despite the more hopeful outlook, global growth remains weak by historical standards and the war in Ukraine continues to weigh on activity and sow uncertainty. The report also cautions that the global economy still faces considerable risks.

New York Times News Service