IMF Lowers Global Growth Outlook to 3.1% for This Year, Down 0.2%p Due to Iran War

IMF. Reuters Yonhap News

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The International Monetary Fund (IMF) has lowered its global economic growth forecast for this year by 0.2 percentage points compared to its projection three months ago, reflecting the impact of the Iran war that broke out in February.

On April 14 (local time), the IMF released its World Economic Outlook (WEO) and projected the global economic growth rate for this year at 3.1%. This is 0.2 percentage points lower than the estimate made in January.

The growth forecast for next year remains the same as in January, at 3.2%. This figure falls short of the average of 3.7% for the past 20 years (2000-2019) and is also lower than the roughly 3.4% average projected for 2024-2025.

The IMF explained that if the war had not occurred, it would have revised this year’s global economic growth rate upward by 0.1 percentage points to 3.4% compared to its previous projection.

By country, the IMF forecasts the U.S. economic growth rate for this year at 2.3%, which is 0.1 percentage points lower than the January forecast. The growth projection for next year was slightly raised to 2.1% from the 2.0% estimate in January, as the impact of the Middle East war was limited due to the U.S. being a net energy exporter.

The Eurozone’s economic growth rate is projected to be 1.1% this year. The projection was revised down by 0.2 percentage points from January, reflecting the burden of higher energy prices that have persisted since the Russia-Ukraine war. The growth rate for next year is forecast at 1.2%.

Japan’s economic growth rates are expected to reach 0.7% this year and 0.6% next year. For Korea, the projections are 1.9% for this year and 2.1% for next year, respectively. In the case of China, the IMF forecasts a growth rate of 4.4% this year and 4.0% next year.

The IMF forecasts the economic growth rate for emerging and developing economies at 3.9% for this year, which is a decrease of 0.3 percentage points from the January forecast. The projection for next year is 4.2%.

This year’s global inflation rate is projected at 4.4%. This represents an upward revision of 0.6 percentage points from January, reflecting the sharp rise in energy and food prices. The IMF expects a rate of 3.7% for next year.

The IMF pointed out that if further tensions arise in the Middle East, it could develop into the largest energy crisis in history, emphasizing that downside risks to the global economy are predominant. The IMF also analyzed that disruptions to rare earth supply chains, rising fiscal deficits and public debt, and weakening central bank independence could negatively affect financial markets and inflation expectations.

If the Middle East war is prolonged and energy prices and expected inflation worsen, the IMF forecasts global economic growth at 2.5% and global inflation at 5.4%. In the event the war continues into next year, leading to a severe scenario, the IMF expects global economic growth to be around 2% and global inflation to reach 6%.

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