Washington: The Russian invasion of Ukraine, ongoing inflation pressures, punitive interest rates, and the lingering effects of the global pandemic are just a few of the threats that the International Monetary Fund lists in its downgrade of the world economy's outlook for 2023.
The lending agency predicted on Tuesday that the global economy would only manage 2.7 percent growth in 2019, which is less than the 2.9 percent it had predicted in July.
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In spite of last year's 6 percent expansion, the IMF maintained its modest 3.2 percent prediction for global growth this year.
Storm clouds are gathering over the global environment, the report said.
The report noted that a volatile and risky environment has been produced as a result of lingering market vulnerabilities, tightening liquidity, persistent inflation, and ongoing efforts by central banks worldwide to raise rates to combat it.
There is a risk of a disorderly repricing of risk because investors have been actively reducing their risk-taking recently as they reevaluate their economic and policy outlook, according to the report. Particularly, "volatility and a sharp tightening of financial conditions could interact with and amplify preexisting financial vulnerabilities."
The IMF warned that emerging market economies, which are already dealing with a "multitude of risks" like high borrowing costs, high inflation, and erratic commodity markets, would be particularly hard hit by any significant downturn.
The IMF also issued a warning, pointing out that corporate credit spreads have significantly increased and that rising rates may have a negative impact on the housing market.
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The IMF warned that the property sector downturn in China has already gotten worse and that failures of real estate developers could affect the banking industry as well. However, the fund predicts that China's economy will expand by just 3.2% this year, a sharp decline from 8.1% growth in 2017.
Although it appears that banks in advanced economies have enough capital and liquidity, the IMF noted that in its global bank stress test, up to 29% of emerging market banks would fail to meet their capital requirements in a severe global recession, resulting in a capital shortfall of over $200 billion. Beginning this week, US banks will release their third quarter earnings, which are predicted to show lower profits.
In contrast to its July prediction of 2.3 percent, the IMF reduced its outlook for US growth to 1.6 percent this year. It anticipates a meagre 1% growth in the US in 2019.
According to the IMF, the economy of the 19 European nations that share the euro will only grow by 0.5 percent in 2023 as a result of the cripplingly high energy prices brought on by Russia's invasion of Ukraine and Western sanctions against Moscow.
The IMF report states that when comparing the fourth quarter of 2022 to the same quarter the previous year, Saudi Arabia's annual world output projections fell by 2.4 percent in October from July's forecasts to reach 4.5 percent.
The Kingdom's forecast for 2023 called for a 3.7 percent annual growth rate.
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Regarding the growth forecasts made by the IMF, Saudi Arabia's output increased by 7.6 percent in 2022 and then by 3.7 percent the following year.
According to IMF data, Saudi Arabia's real gross domestic product is expected to grow by 3.4 percent annually by the end of this year, reaching 7.6 percent.
The Kingdom's GDP is anticipated to grow by a modest 2.4 percent in 2023 on an annual basis before rebounding to 3.8 percent growth in 2024.