BlackRock Investment Institute

Macro insights

IMF cuts growth forecasts...

The International Monetary Fund (IMF) is expecting weaker global growth and higher inflation - especially in Europe – due to the shock emanating from the war in Ukraine. We agree. This is a new supply shock on top of the existing one driven by the post-pandemic restart of economic activity. The IMF now expects global growth to be 3.6% this year and next, a downgrade of 0.8 and 0.2 percentage points respectively. See the chart. The impact of the war is greatest on Russia and the euro area, which together account for two thirds of the downgrade.

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IMF GDP growth forecast change, April vs. January 2022

Sources: BlackRock Investment Institute, IMF World Economic Outlook, April 2022. Notes: The chart shows revisions to IMG growth forecasts made in April 2022 versus those made in January 2022.

…and expects higher inflation


The IMF also expects elevated commodity prices to drive headline inflation rates even higher. It now sees U.S. inflation peaking near 9% later this year. The IMF echoes our view that the supply-driven inflation puts central banks in a bind. They want to lift policy rates quickly but try to avoid slamming the brakes on the economy. Where do we differ? The IMF projects inflation to fall back to target even without overly aggressive policy tightening. We see inflation settling for a time above target, at around 3%.

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Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Macro Research

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