## EXECUTIVE SUMMARY

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### Global context and main drivers
- The global economy is experiencing a number of turbulent challenges: inflation higher than seen in several decades, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic.
- Normalization of monetary and fiscal policies that delivered unprecedented support during the pandemic is cooling demand as policymakers aim to lower inflation back to target.
- A growing share of economies are in a growth slowdown or outright contraction.
- The global economy’s future health rests critically on:
  - the successful calibration of monetary policy,
  - the course of the war in Ukraine,
  - the possibility of further pandemic-related supply-side disruptions, for example, in China.

### Growth and inflation outlook (exact forecasts)
- Global growth:
  - 6.0 percent in 2021
  - 3.2 percent in 2022
  - 2.7 percent in 2023
- Characterization: "This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic."
- Factors contributing to slowdowns: a US GDP contraction in the first half of 2022, a euro area contraction in the second half of 2022, prolonged COVID-19 outbreaks and lockdowns in China with a growing property sector crisis.
- About a third of the world economy faces two consecutive quarters of negative growth.
- Global inflation:
  - 4.7 percent in 2021
  - 8.8 percent in 2022
  - 6.5 percent in 2023
  - 4.1 percent by 2024
- Inflation surprises: Upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging market and developing economies.

### Risks to the outlook (balance and specific threats)
- Risks are unusually large and tilted to the downside.
- Specific risk channels identified:
  - Monetary policy could miscalculate the right stance to reduce inflation.
  - Divergent policy paths in the largest economies could lead to further US dollar appreciation and cross-border tensions.
  - More energy and food price shocks might cause inflation to persist longer.
  - Global tightening in financing conditions could trigger widespread emerging market debt distress.
  - Halting gas supplies by Russia could depress output in Europe.
  - A resurgence of COVID-19 or new global health scares might further stunt growth.
  - A worsening of China’s property sector crisis could spill over to the domestic banking sector and weigh heavily on the country’s growth, with negative cross-border effects.
  - Geopolitical fragmentation could impede trade and capital flows, further hindering climate policy cooperation.
- Tail risk: "about a 25 percent chance of one-year-ahead global growth falling below 2.0 percent—in the 10th percentile of global growth outturns since 1970."

### Policy guidance and priorities
- Monetary policy:
  - Priority is staying the course to restore price stability.
  - Front-loaded and aggressive monetary tightening is critical to avoid inflation de-anchoring as households and businesses base wage and price expectations on recent inflation experience (as demonstrated in Chapter 2).
- Fiscal policy:
  - Priority is protection of vulnerable groups through targeted near-term support to alleviate the burden of the cost-of-living crisis.
  - Overall fiscal stance should remain sufficiently tight to keep monetary policy on target.
- Debt and financial stability:
  - Addressing growing government debt distress caused by lower growth and higher borrowing costs requires a meaningful improvement in debt resolution frameworks.
  - With tightening financial conditions, macroprudential policies should remain on guard against systemic risks.
- Structural and climate-related policies:
  - Intensifying structural reforms to improve productivity and economic capacity would ease supply constraints and support monetary policy in fighting inflation.
  - Policies to fast-track the green energy transition will yield long-term payoffs for energy security and the costs of ongoing climate change.
  - Chapter 3 shows that phasing in the right measures over the coming eight years will keep the macroeconomic costs manageable.
- Multilateral cooperation:
  - Successful multilateral cooperation will prevent fragmentation that could reverse the gains in economic well-being from 30 years of economic integration.

*Source: EXECUTIVE SUMMARY, WORLD ECONOMIC OUTLOOK: COUNTERING THE COST-OF-LIVING CRISIS*

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_Source: https://www.imf.org/-/media/files/publications/weo/2022/october/english/execsum.pdf_