The International Monetary Fund (IMF) says global Gross Domestic Product (GDP) growth is expected to moderate from 5.9 per cent in 2021 to 4.4 per cent in 2022.

The Bretton Woods Institution made the forecast in its January World Economic Outlook (WEO), titled “Rising Caseloads, a Disrupted Recovery, and Higher Inflation” released in Washington on Tuesday.

According to it, the reversal is half a percentage point lower than what it predicted in the October WEO, largely reflecting forecast markdowns in the two largest economies (USA and China), adding that the global economy enters 2022 in a weaker position than previously expected.

It, however, project Sub-Saharan Africa’s growth to be 3.7 per cent in 2022 and 4.0 per cent in 2023, while Nigeria’s economy is expected to grow by 2.7 per cent in 2022 and 2023.

“As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions.

“Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies.

“The ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects.”

The report also said that global growth was expected to slow to 3.8 per cent in 2023.

According to the IMF, although this is 0.2 percentage point higher than in the previous forecast, the upgrade largely reflects a mechanical pickup after current drags on growth dissipate in the second half of 2022.

The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective.

It also said that the emergence of a new variant was not the only risk that had crystallised in recent months, but that inflation continued to rise throughout the second half of 2021, driven by several factors of varying importance across regions.

“Fossil fuel prices have almost doubled in the past year, driving up energy costs and causing higher inflation, most prominently in Europe.

“Rising food prices have contributed to higher inflation, for example in sub-Saharan Africa.

“Elevated inflation is expected to persist for longer than envisioned in the October WEO, with ongoing supply chain disruptions and high energy prices continuing in 2022.

“Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.”

The IMF, however, believes that with the pandemic continuing to maintain its grip, the emphasis on an effective global health strategy was more salient than ever.

It said that worldwide access to vaccines, tests and treatments was essential to reduce the risk of further dangerous COVID-19 variants.

To achieve this requires increased production of supplies, as well as better in-country delivery systems and fairer international distribution.

It added that monetary policy in many countries would need to continue on a tightening path to curb inflation pressures, while fiscal policy, operating with more limited space than earlier in the pandemic, would need to prioritise health and social spending while focusing support on the worst affected.

“In this context, international cooperation will be essential to preserve access to liquidity and expedite orderly debt restructurings where needed.

“Investing in climate policies remains imperative to reduce the risk of catastrophic climate change.”

Gita Gopinath, IMF’s Chief Economist, said that at the national level, policies should remain tailored to country specific circumstances including the extent of recovery, of underlying inflationary pressures, and available policy space.

According to her, both fiscal and monetary policies will need to work in tandem to achieve economic goals.

She also said that given the high level of uncertainty, policies must also remain agile and adapt to incoming economic data.

“With policy space diminished in many economies, and strong recoveries underway in others, fiscal deficits in most countries are projected to shrink this year.

“The fiscal priority should continue to be the health sector, and transfers, where needed, should be effectively targeted to the worst affected.

“All initiatives will need to be embedded in medium-term fiscal frameworks that lay out a credible path for ensuring public debt remains sustainable.”