Omicron Scare: IMF lowers its global growth prediction for 2022 to 4.4 pc

WASHINGTON: According to a newly released update to the International Monetary Fund's World Economic Outlook report, the global economy would grow by 4.4 percent in 2022, down 0.5 percentage points from October's prediction.

Supply interruptions, increased prices, record debt, and prolonged uncertainty will hamper growth, according to First Deputy Managing Director Gita Gopinath, who spoke at a virtual press event on Tuesday.

"The rapid expansion of the Omicron variant has resulted in repeated mobility restrictions and exacerbated labour shortages in many countries," said Gopinath, who formerly served as the IMF's Chief Economist.

While Omicron will have an impact on activity in the first quarter of 2022, the effect will wane in the second quarter. "Supply interruptions continue to weigh on activity and contribute to greater inflation," she said, adding to pressures from robust demand and rising food and energy prices.

According to the latest report, supply-demand imbalances are expected to decrease by 2022, based on industry expectations of improved supply, as demand shifts from goods to services and extraordinary policy support is withdrawn. The IMF has raised its inflation predictions for both advanced and emerging market and developing economies for 2022, predicting that high price pressures will last longer. Inflation is anticipated to fall in 2023 if inflation expectations remain stable.

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