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Inflation and Recession Predictions in 2023/2024

The world is facing economic crisis and struggling in the fight against it. The crisis is a result of pandemic COVID-19 in 2020, following with energetic crisis in 2021, and conflict in Ukraine in 2022. All these events lead to high inflation rates in all countries in the world with some exceptions such as Switzerland. The 2023 is a year of the war against inflation. Central banks across the globe raised referent interest rates couple of times in order to slow down inflation. Increasing of referent interest rates leads to slower economic growth and it was described by economic experts that inflation increase would slow down by the end of 2023, and be under control by the middle of 2024. The International Monetary Fund (IMF) has revised its global economic growth forecast for 2023 slightly higher, as forecasts are now better than previously for both advanced economies and major emerging economies.

In new data on the outlook for the world economy, the IMF stated that it now expects world economic growth to be three percent in 2023 compared to the 2.8 percent expected in its previous assessment in April as it is reported by many sources. It is also expected that economic activity will remain at the same level in 2024, without changes compared to the previous estimate.

Inflation predictions

Inflation predictions
Inflation predictions

Most advanced economies, such as major emerging economies, appear to have performed better than the IMF expected, although almost everywhere restrictive policies are in place to combat inflation that remains “stubbornly high”.

In this regard, the IMF also expects slight progress by the end of the year, as inflation may reach 6.8 percent at the global level at the end of the year, which is 0,2% less than predicted in April. However, inflation will also last longer: it should still be around 5,2% at the end of 2024, while in March the institution expected it to be 0,3% points lower than that.

The IMF insists that it is necessary to continue “monetary tightening” to bring inflation back to the target level, even though this affects an economy that has so far been more resilient than expected, especially in rapidly developing countries.

Recession in strong economic countries

Recession in strong economic countries
Recession in strong economic countries

In the Group of seven most developed liberal economies, Germany should be the only one to have a recession in 2023. The recession looks increasingly inevitable and larger than expected in April, so the IMF now expects a decline in economic activity in Germany of 0,3% compared to the 0,1% it expected in April.

Other major European economies have proven to be more resilient than Germany: France is expected to grow by 0,8%, which is 0,1% higher than in April, Italy by 1,1% (0,4% higher) while Spain’s economy is showing real signs of good health with expected growth of 2,5%, one percentage point higher than in April.

In the US, the risk of a recession, which has been announced for a long time, seems to have been removed despite successive increases in interest rates from March 2022. The IMF expects growth of 1,8% for the US economy, compared to 1,6% in April.

Among fast-developing countries, growth forecasts for China’s economy remain unchanged at 5,2% in 2023 and 4,5% in 2024, despite fears of a slowdown risk and the effects of possible deflation as China’s inflation in June was zero at annual level.

Russia should expect a severe recession in 2023, according to the IMF’s initial report published in October last year, but forecasts for Russia are constantly improving. In April, the IMF forecast growth in Russia’s economic activity for this year of 0.7 percent, and the IMF now forecasts growth of 1,5%.

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