## WEO Update July 2022 Press Briefing Transcript

_IMF News, July 26, 2022_

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## Bibliographic details
- Published: July 26, 2022

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### Global outlook and headline forecasts
- Global output contracted in the second quarter of this year.
- Baseline forecast: global growth slows from last year's 6.1 percent to 3.2 percent this year, and 2.9 percent next year.
- Downgrades of 0.4 and 0.7 percentage points from April.
- Global trade expected growth: 4.1 percent in 2022, and 3.2 percent in 2023.

### Major economy projections and country highlights
- United States:
  - Growth forecast: 2.3 percent this year, and 1.0 percent next year.
  - Labor market: unemployment rate cited at 3.6 percent.
  - Q4 2023 quarterly growth example: 0.6 percent (used to illustrate narrow path to avoid recession).
- China:
  - Growth forecast: 3.3 percent this year (described as the slowest in more than four decades, excluding the pandemic).
  - Slowdown attributed to COVID-19 outbreaks, lockdowns, and a deepening real estate crisis.
- Euro area:
  - Growth forecast: 2.6 percent this year, and 1.2 percent in 2023.
  - Downgrades reflect spillovers from the war in Ukraine and tighter monetary policy.
- Russia:
  - 2022 growth forecast revised to -6 percent (up from a prior -8.5 percent projection).
  - Revision attributed to resilient domestic demand, effective financial stabilization measures, fiscal support, and strong export revenues in the first half of the year.
  - 2023 outlook revised down by -1.2 percentage point.
- ASEAN-5:
  - Aggregate expansion: 5.3 percent this year, and 5.1 percent in 2023.
  - Noted downgrade for 2023 described by IMF as "marked down 2023 by 8 percentage points."
  - Inflation in 2022 for ASEAN-5: 3 to 7 percent depending on the country.
- Egypt:
  - Growth forecast: 5.9 percent in 2022, and 4.8 percent in 2023.
  - Inflation forecast: 8.7 in 2022, and 14 percent in 2023.
  - Authorities have requested IMF assistance; IMF team held productive discussions toward reaching a staff level agreement.
- Canada:
  - 2022 growth: about 3.4 percent; 2023: about 1.8 percent.
  - IMF cut 2023 forecast for Canada by one percentage point in this Update.
- Japan:
  - Noted sizable downgrades: cuts by 0.7 and 0.6 percentage points for 2022 and 2023 respectively (relative to prior forecasts).
  - Japan’s 2021 output growth was 1.7 percent; economy still below pre-pandemic output levels.
- Argentina:
  - Inflation: year-on-year in June cited at 64 percent.
  - IMF emphasizes priority of bringing back inflation and price dynamics to stable levels.
- Sub‑Saharan Africa (aggregate):
  - Growth: 3.8 percent in 2022 and 4 percent in 2023 on average.
  - Divergence: oil exporters boosted by higher oil prices; oil importers face headwinds from higher fertilizer and wheat costs.

### Inflation and monetary policy
- Global inflation revised up despite slowing activity:
  - Inflation this year anticipated to reach 6.6 percent in advanced economies, and 9.5 percent in emerging market and developing economies.
  - Inflation is projected to remain elevated longer and has broadened in many economies.
- Central banks:
  - Major central banks in advanced economies are withdrawing monetary support faster than expected in April.
  - Many emerging market and developing economies began raising interest rates last year.
  - Result: a historically unprecedented synchronized monetary tightening across countries.
- IMF guidance:
  - "Bringing it back to Central Bank targets should be the top priority for policy makers."
  - Central Banks that have started tightening should stay the course until inflation is tamed.
  - Tighter monetary policy will have real economic costs, but delaying it will only exacerbate hardship.

### Downside risks and alternative scenario
- Key downside risks listed:
  - A sudden stop of European gas flows from Russia.
  - Inflation remaining stubborn if labor markets remain overly tight, inflation expectations de-anchor, or inflation proves more costly than expected.
  - Tighter global financial conditions inducing a surge in debt distress in emerging market and developing economies.
- Plausible alternative scenario (some risks materialize, including full shutdown of Russian gas flows to Europe):
  - Global growth decelerates further to about 2.6 percent this year, and 2.0 percent next year.
  - In this scenario both the United States and the Euro area experience near-zero growth next year, with negative knock-on effects for the rest of the world.
  - Historical note: global growth has only been below 2.0 percent five times since 1970 (1973, 1981-82, 2009, and 2020).

### Financial stability, debt, and spillovers to EMDEs
- Tighter financial conditions (higher borrowing costs, diminished credit flows, stronger dollar, weaker growth) will push more countries into debt distress.
- Share of emerging markets and developing economies in or at high risk of debt distress has more than tripled from a decade ago.
- Debt resolution:
  - Mechanisms remain slow and unpredictable, hampered by difficulties obtaining coordinated agreements from diverse creditors.
  - Recent progress in implementing the Group of 20's Common Framework is anchoring, but further improvements are urgently needed.
  - IMF encourages proactive debt restructuring to restore sustainability and unlock IMF support.

### Policy recommendations and priorities
- Monetary policy:
  - Priority: bring inflation back to central bank targets; central banks that have started tightening should continue until inflation is under control.
- Fiscal policy:
  - Target fiscal support to cushion the vulnerable; set targeted support with higher taxes or lower government spending to ensure fiscal policy does not undermine disinflationary objectives.
  - Recognize constrained fiscal space in many countries.
- Financial sector:
  - Use macro‑prudential tools to safeguard financial stability.
  - Where flexible exchange rates are insufficient, be ready to implement foreign exchange interventions or capital flow management measures in a crisis.
- Trade and food/energy policy:
  - Domestic measures to address high energy and food prices should focus on those most affected, without distorting prices.
  - Governments should refrain from hoarding food and energy and unwind trade barriers (e.g., food export bans) that drive world prices higher.
- Pandemic response:
  - Step up vaccination campaigns, resolve vaccine distribution bottlenecks, and ensure equitable access to treatment.
- Climate and energy transition:
  - Prompt multilateral action needed to limit emissions and raise investments to accelerate the Green transition.
  - Temporary measures to use fossil fuels in energy shortfalls should be limited and not increase emissions overall.
  - Accelerate credible and comprehensive climate policies to increase Green energy supply; Green energy independence can be compatible with national security objectives.

### SDRs and IMF resources
- IMF issued a record $650 billion in special drawing rights (SDRs) about a year prior (August of last year).
- Calls from some U.S. policymakers for a fresh issuance of SDRs have been noted; IMF is exploring options and SDRs are part of a menu of instruments, but they are not a panacea.
- Editor's note included in transcript: "There has been no discussion at the IMF of a further SDR allocation," an IMF spokesperson said. "Despite recent developments and high global uncertainty, it would be premature to conclude that the long-term global need for reserves has changed significantly."

*Transcript: WEO Update July 2022 Press Briefing Transcript, July 26, 2022; IMF Communications Department.*

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## References

- [https://www.imf.org/en/About/senior-officials/Bios/pierre-olivier-gourinchas](https://www.imf.org/en/About/senior-officials/Bios/pierre-olivier-gourinchas)
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_Source: https://www.imf.org/en/news/articles/2022/07/27/tr072622-weo-uptate-july-22-press-briefing-transcript_