Source: CGTN    Published: 2023-2-1

The International Monetary Fund (IMF) released its latest World Economic Outlook (WEO) on January 31, presenting a better-than-expected world economic performance in 2022 and an upward revision to its 2023 forecast.

The latest WEO forecast says that there will be 3.4 percent world GDP growth in 2022, 0.2 percentage points higher than its October estimate, largely because of the improvement in the U.S. and Eurozone. The U.S. economy grew by 2.0 percent in 2022, 0.4 percentage points higher than the IMF's October estimate. Eurozone's GDP growth was also 0.4 percentage points higher at 3.5 percent. Germany avoided a widely expected downturn in the last quarter of 2022 and had a whole-year growth rate at 1.9 percent. The fall in world energy and food prices, and the resilient U.S. consumption, also weighed in on the easing of the world economic downward trend.

As world growth 2023 revised upward, China's rebound weighs significantly

The January WEO shows a more optimistic outlook for 2023 world growth, which is marginally revised up to 2.9 percent, compared to 2.7 percent in its October WEO. It's more upbeat than the UN report, issued on January 25, just six days before, which put the world GDP growth estimate at 1.9 percent. The WEO is also higher than the World Bank's pessimistic estimate of only 1.7 percent growth.

The upbeat tone comes from both developed and developing economies. Estimate for developed economies was revised upward by 0.1 percentage points from 1.1 to 1.2 percent. The emerging market and developing economies will also grow by 4.0 percent, 0.3 percentage points revised up.

The WEO cited a number of factors supporting better growth prospects in 2023, including the economic resilience in many countries, especially after China's optimization of its COVID-19 response, and the gradual recovery from the disruptions caused by the Russian-Ukraine conflict. The drop in world energy price will also play its part. The price is estimated to fall by 16.2 percent in 2023, faster than its October estimate at 12.9 percent.

China is a key player in the improvement of the world economic outlook in 2023. The latest WEO estimates China's GDP will grow by 5.2 percent in 2023, 0.8 percentage points up on its October 2022 edition, and 0.4 percentage points higher than the UN estimate of 4.8 percent. As China accounts for 18 percent of the global GDP and 43.4 percent of total economic size of the emerging markets and developing economies (EMDE), so the country's contribution is more apparent in the higher growth estimate for EMDE.

The January WEO raised its forecast of EMDE economic growth for 2023 by 0.3 percentage points, from 3.7 percent in its October 2022 edition to 4.0 percent, and by 0.4 percentage points, from 4.9 percent to 5.3 percent for developing Asia.

Peace and multilateralism: Solutions to downside risks

Nonetheless, "the balance of risks to the outlook remains tilted to the downside," said IMF's Chief Economist Pierre-Olivier Gourinchas. There are six major risks, including world debt distress, world inflation, intensified geopolitical fragmentation, etc.

The rebound of the Chinese economy weighs significantly to the global economic outlook for 2023. Similarly, slowing down in Chinese economic momentum also weighs heavily. It's the world second-largest economy's global obligation to ensure steady and robust growth, and do a good job in COVID prevention and control, so as to minimize its impact, keep the economic momentum unaffected and stabilize the property market in the short term. China stands confident to attain a growth rate over 5 percent in 2023 and serve as a pivotal economic engine for the whole world.

The only solution is to bring about an early end to the Russian-Ukraine conflict with a peaceful settlement through negotiations between the two countries, with joint diplomacy by all countries. The escalation of the conflict must stop.

The pathway to reduce the current major risks hanging over the world economy lies in world cooperation, globalization and multilateralism. The U.S. has pushed forward world geo-economic fragmentation for geopolitical and hegemony purposes, which has increased the difficulties in global economy, trade and investment.

In a report published on January 16, the IMF warned that the cost of trade fragmentation could range from 0.2 to almost 7 percent of the global GDP which is equivalent to the combined annual economic output of Germany and Japan.

The current WEO appeals for strengthening multilateralism and global trade as the report said that strengthening the global trading system would address risks associated with trade fragmentation. This can be achieved by rolling back restrictions on food exports and other essential items such as medicine, upgrading World Trade Organization (WTO) rules in critical areas such as agricultural and industrial subsidies, concluding and implementing new WTO-based agreements, and restoring the WTO dispute settlement system.

Amid the improved outlook and enhanced risks in global economy, all countries must work together, enhancing cooperation, coordinating macroeconomic policies and fighting all the major risks, and especially fragmentation. China will serve not only as a leading engine for world growth, but serve as a strong pillar for globalization and multilateralism in 2023 and the years ahead.