WASHINGTON (AP) — The International Monetary Fund is downgrading its forecast for the world economy this year, citing the spread of COVID-19's omicron variant, higher energy prices, an uptick in inflation and a deteriorating outlook for the world's two biggest economies — the United States and China.
The 190-country lending agency now forecasts the global economy will expand 4.4% in 2022. That's down from an estimated 5.9% last year and from the 4.9% the IMF was forecasting for 2022 back in October.
The IMF slashed the growth forecast for the United States — world's largest economy — to 4% from the 5.2% it predicted in October. The agency no longer expects any economic stimulus from President Joe Biden's Build Back Better social policy bill, which has stalled in Congress.
The U.S. economy is also contending with supply-chain bottlenecks that prevent companies from filling customer orders, and with the Federal Reserve's impending move to raise interest rates to cool off the hottest year-over-year inflation in four decades.
The Chinese economy is forecast to grow 4.8% this year — down from 8.1% last year and 0.8 percentage points slower than the IMF expected in October. China's zero-tolerance approach to COVID is likely to take an economic toll as is financial stress on the country's property developers, according to the agency.
The IMF expects the 19 European countries that share the euro currency to collectively grow 3.9% this year, down from 5.2% in 2021. Japan is forecast to register 3.3% growth this year, up from 1.6% last year, as a result of continuing government support for the economy.
The IMF expects inflation to accelerate this year and fade in 2023. It sees consumer prices rising 3.9% in advanced economies, the highest since 1991 and up sharply from the 2.3% the IMF forecast in October. And it sees 5.9% inflation this this year and developing and emerging economies, highest since 2011 and up from the 4.9% forecast in October.
The IMF expects inflation to slow next year to 2.1% in advanced economies and 4.7% in developing markets.