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Gloomy prospects for the global economy

"Gloomy and uncertain": With these words, the International Monetary Fund (IMF) titles its new report. And it's not just the headline that sounds pessimistic. The IMF states soberly that several crises are affecting the global economy, which is already weakened by the corona pandemic. These include high inflation – especially in Europe and the US -, the consequences of the Russian invasion of Ukraine and the government-imposed movement restrictions in China.

The International Monetary Fund therefore speaks of an – literally – "increasingly gloomy development in 2022". The IMF corrected its growth forecast downwards again. The experts at the Monetary Fund now only expect global growth of 3.2 percent for the current year. That is another 0.4 percentage points less than assumed in the forecast in April.

Only 1.2 percent growth in Germany

Last week, the Monetary Fund in Washington revised its expectations for the German economy downwards, both for this year and next. Oya Celasun, Head of the Germany Mission at the IMF, expressly referred to the negative global situation. The German economy will only grow by 1.2 percent this year.

This means that the IMF experts are significantly more pessimistic than, for example, the German government's council of experts or the economic research institute ifo. German industry in particular is suffering from global supply chain problems. The order books of German companies are full, but there are problems with production, according to IMF analyst Celasun. There is a need to catch up here. In the short term, the gas problem will overshadow everything in Germany.

"Risks mostly point to the downside"

Anyone who is counting on the global economy improving soon will be disappointed by the experts at the IMF. Their report states unequivocally: "As far as the outlook for the global economy is concerned, the risks point predominantly to the downside." According to the IMF, the biggest risks continue to be the consequences of the Russian war in Ukraine. Russia's leadership could possibly stop gas deliveries to Europe altogether – with drastic consequences for the economy.

The report by the IMF also repeatedly mentions China: The restrictions on movement ordered by the state and party leadership and the corona lockdowns in the People's Republic weakened the country's economy, and that in turn made the global supply chain problems even worse. The IMF is calling on politicians worldwide to fight high inflation in particular. The key interest rates would have to rise for this – even if it hurts.

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