## EXECUTIVE SUMMARY

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**Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/weo/2023/april/english/execsum.pdf)

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### Global outlook and baseline forecast
- Baseline forecast assumes that the recent financial sector stresses are contained.
- Global growth:
  - Falls from 3.4 percent in 2022 to 2.8 percent in 2023.
  - Rises slowly and settles at 3.0 percent five years out.
  - This is described as the lowest medium-term forecast in decades.
- Advanced economies:
  - Growth slows from 2.7 percent in 2022 to 1.3 percent in 2023.
- Alternative scenario with further financial sector stress:
  - Global growth declines to about 2.5 percent in 2023.
  - Advanced economy growth falls below 1 percent.
  - Characterized as the weakest growth since the global downturn of 2001, excluding the initial COVID-19 crisis in 2020 and the global financial crisis in 2009.
- Drivers dampening growth:
  - Tight policy stances to bring down inflation.
  - Fallout from deterioration in financial conditions.
  - Ongoing war in Ukraine.
  - Growing geoeconomic fragmentation.

### Inflation, commodity prices, and medium-term dynamics
- Global headline inflation:
  - Set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices.
- Underlying (core) inflation:
  - Likely to decline more slowly; return to target is unlikely before 2025 in most cases.
- Once inflation rates are back to targets:
  - Deeper structural drivers will likely reduce interest rates toward their pre-pandemic levels.
- Commodity and supply factors:
  - Commodity prices that rose sharply following Russia’s invasion of Ukraine have moderated, but the war continues.
  - Infectious COVID-19 strains caused widespread outbreaks last year, but economies that were hit hard—most notably China—appear to be recovering, easing supply-chain disruptions.

### Financial sector developments and risks
- Recent developments:
  - Stubbornly high inflation led central banks to raise interest rates rapidly.
  - Side effects from the fast rise in policy rates have become apparent, with banking sector vulnerabilities coming into focus and fears of contagion across the broader financial sector, including nonbank financial institutions.
  - Policymakers have taken forceful actions to stabilize the banking system.
  - Financial conditions are fluctuating with shifts in sentiment (as discussed in depth in the Global Financial Stability Report).
- Risk assessment:
  - Risks are heavily skewed to the downside; chances of a hard landing have risen sharply.
  - Specific downside risks listed:
    - Financial sector stress could amplify and contagion could take hold, weakening the real economy through a sharp deterioration in financing conditions and compelling central banks to reconsider their policy paths.
    - Pockets of sovereign debt distress could, in the context of higher borrowing costs and lower growth, spread and become more systemic.
    - The war in Ukraine could intensify and lead to more food and energy price spikes, pushing inflation up.
    - Core inflation could turn out more persistent than anticipated, requiring even more monetary tightening to tame.
    - Fragmentation into geopolitical blocs has the scope to generate large output losses, including through its effects on foreign direct investment.

### Policy recommendations and fiscal considerations
- Central banks:
  - Need to remain steady with their tighter anti-inflation stance.
  - Should be ready to adjust and use their full set of policy instruments—including to address financial stability concerns—as developments demand.
- Fiscal policymakers:
  - Should buttress monetary and financial policymakers’ actions in getting inflation back to target while maintaining financial stability.
  - In most cases, governments should aim for an overall tight stance while providing targeted support to those struggling most with the cost-of-living crisis.
  - In a severe downside scenario, automatic stabilizers should be allowed to operate fully and temporary support measures be utilized as needed, fiscal space permitting.
  - Medium-term debt sustainability will require well-timed fiscal consolidation but also debt restructuring in some cases.
- Exchange rate and capital flow policies:
  - Currencies should be allowed to adjust to changing fundamentals.
  - Deploying capital flow management policies on outflows may be warranted in crisis or imminent crisis circumstances, without substituting for needed macroeconomic policy adjustment.
- Structural and multilateral measures:
  - Measures to address structural factors impeding supply could ameliorate medium-term growth.
  - Steps to strengthen multilateral cooperation are essential, including by bolstering the global financial safety net, mitigating the costs of climate change, and reducing the adverse effects of geoeconomic fragmentation.

*Source: execsum*

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_Source: https://www.imf.org/-/media/files/publications/weo/2023/april/english/execsum.pdf_