How resilient will countries be in 2022? Economies have to contend with commodity shortages related to the Russia-Ukraine war, supply chain issues due to lockdowns in China, and tightening monetary policy as inflation rises.
In light of these challenges, the International Monetary Fund (IMF) has lowered its economic predictions for 2022 and beyond. The IMF predicts that global GDP growth will slow from 6.1% in 2021 to 3.6% in 2022 and 2023.
GDP Forecasts by Country
Due to the war in Ukraine, the IMF notes that the economic predictions for 2022 and beyond have considerable uncertainty. The projections also assume that the conflict remains confined to Ukraine and that the pandemic’s health and economic consequences lessen during 2022.
Here are the IMF’s predictions for real GDP growth by country. Unsurprisingly, Ukraine will have the most severe contraction of -35% this year. Russia’s invasion has damaged or destroyed 30% of the nation’s infrastructure, and more than 14 million people have fled their homes.
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Guyana, a country of less than 800,000 people in South America, is forecast to have the highest GDP growth of 47.2% in 2022 and 34.5% in 2023. The country has begun to rapidly develop its offshore oil industry, with oil earnings estimated to make up nearly 40% of its GDP.
In Asia, India is projected to see strong growth of 8.2% in 2022 and 6.9% in 2023. The growth is supported by government spending and economic reforms, such as lowering the corporate tax rate and allowing more foreign direct investment. In fact, foreign direct investment reached a record $84 billion in 2021-22.
Meanwhile, the IMF predicts that GDP growth in the U.S. will hit 3.7% in 2022 and 2.3% in 2023. The Russia-Ukraine war is expected to slow growth in America’s trading partners, reducing their demand for American goods. The central bank has also withdrawn U.S. monetary support faster than expected as rates rise to combat inflation. Even still, the IMF expects that the U.S. will reach its pre-pandemic trend output path by 2022.
Supporting Growth
Certainly, there are a number of risks facing the global economy. Countries with strong fiscal and monetary support, as well as countries with in-demand exports, have some of the best economic predictions for 2022 and beyond.
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The IMF also offers countries various recommendations in order to support growth. For instance, central banks can offer clear interest rate guidance to minimize surprises that disrupt the markets. Governments can continue offering targeted fiscal support to vulnerable populations, such as refugees and households most impacted by the pandemic.
Over the longer-term, countries can focus on reskilling their workforce for the digital transformation, investing in renewables for the green transition, and improving the resiliency of global supply chains.
Story attributed to Visual Capitalist.
