OUT LOOK

IMF projects global economy to shrink to 4.4% in 2022

It expects inflation to remain well anchored as the pandemic eases its grip

In Summary
  • It has upgraded  economic outlook for Sub Saharan Africa to  4% in 2021 and 3.7% in 2022
  • Forecasts are based on information up to 18 January 2022.
IMF headquarters
IMF headquarters

The International Monetary Fund (IMF) has upgraded economic outlook for Sub Saharan Africa to four per cent from 3.8 per cent projected in October. 

The lender, however, expects the growth to shrink marginally to 3.7 per cent this year before stabilising to four per cent in 2023. 

It expects inflation to remain well anchored and the pandemic eases its grip, higher inflation should fade as supply chain disruptions ease, monetary policy tightens, and demand rebalances away from goods-intensive consumption towards services.

''The rapid increase in fuel prices is also expected to moderate during 2022–23, which will help contain headline inflation,'' IMF says in the latest World Economic Outlook. 

Futures markets indicate oil prices will rise about 12 per cent and natural gas prices about 58 per cent in 2022 (both considerably lower than the increases seen in 2021) before retreating in 2023 as supply-demand imbalances recede further. 

The global economy is estimated at 5.9 per cent in 2021 and is expected to moderate to 4.4 per cent in 2022, half a percentage point lower than in the October last year.

The baseline incorporates anticipated effects of mobility restrictions, border closures, and health impacts from the spread of the Omicron variant.

Even so, the report says these vary by country depending on susceptibility of the population, the severity of mobility restrictions, the expected impact of infections on labor supply, and the importance of contact-intensive sectors.

"These impediments are expected to weigh on growth in the first quarter of 2022,"IMF notes.

It adds that the negative impact is expected to fade starting in the second quarter, assuming that the global surge in Omicron infections abates and the virus does not mutate into new variants that require further mobility restrictions.

Forecasts are based on information up to January 18.