World Economic Outlook | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

Introduction

• The global economy is facing an uncertain and dismal outlook due to the Covid pandemic and Russia's invasion of Ukraine. According to the IMF's World Economic Outlook update from July 2022, the global economy is expected to slow down further to 3.2% in 2022, down from the previous forecast of 3.6% in April.
• The growth projection for 2023 has also been reduced to 2.9% from the earlier estimate of 3.6%, citing the impact of tighter monetary policy. In 2021, the world's growth had rebounded to 6.1% after the COVID-19 pandemic caused a 3.1% contraction in global output in 2020. However, with the darkening economic outlook due to various factors, the world may be on the verge of a global recession.

Analysis of the report

• After a slight recovery in 2021, the global economy has experienced negative developments in 2022 due to a number of risks that have materialized. These include a contraction of global output in the second quarter, caused by downturns in China and Russia, and lower than expected US consumer spending. 
• Several shocks have impacted the world economy, including higher-than-expected inflation worldwide, a worse-than-anticipated slowdown in China due to COVID-19 outbreaks and lockdowns, negative spillovers from the war in Ukraine, and tighter financial conditions. As a result, the IMF has revised its growth forecast down to 3.2% for 2022 and 2.9% for 2023. 
• The risks to the outlook are largely tilted to the downside, with potential impacts on inflation, debt distress, Chinese growth, and global trade and cooperation.
• To address these challenges, policymakers should prioritize taming inflation and consider targeted fiscal support to cushion the impact on vulnerable populations. Tighter monetary policy will have real economic costs, but delay will only worsen the situation. 
• The use of macroprudential tools and debt resolution frameworks will be necessary to maintain financial stability. Policies to address impacts on energy and food prices should be targeted to those most affected, and efforts to mitigate climate change should be prioritized through multilateral action.