World Economic Outlook(Photo: Viewapart/iStock by Getty Images) The global economy enters 2022 in a weaker position than previously expected, according to the IMF's World Economic Outlook Update. Global growth is expected to moderate from 5.9 percent in 2021 to 4.4 percent in 2022—half a percentage point lower for 2022 than projected in the previous Outlook, in October, largely reflecting forecast markdowns in the world's two largest economies, the United States and China. In a new blog, IMF First Deputy Managing Director Gita Gopinath said the rapid spread of the Omicron variant has led to renewed mobility restrictions in many countries and increased labor shortages. Supply disruptions are still weighing on activity and contributing to higher inflation, while record debt and rising inflation constrain the ability of many countries to address renewed disruptions, she added. Global growth is expected to slow to 3.8 percent in 2023. Although this is 0.2 percentage point higher than the previous forecast, the upgrade largely reflects a pickup after current drags on growth dissipate in the second half of 2022. --Breaking out of the pandemic: To address many of the difficulties facing the world economy, it is pivotal to break the hold of the pandemic. This will require a global effort to ensure widespread vaccination, testing, and access to medication, including newly developed anti-viral medications. As of now, only 4 percent of the population of low-income countries are fully vaccinated versus 70 percent in high-income countries.  Watch a a press briefing where Gopinath and the IMF's Petya Koeva Brooks and Malhar Nabar answer questions about inflation and interest rates as well as the outlook for Brazil, India, Germany, Mexico, Nigeria and the United Kingdom, among other economies.
Asset Prices(Photo: Chine Nouvelle/SIPA/Newscom) As financial vulnerabilities remain elevated in several sectors, monetary authorities should provide clear guidance about the future stance of policy to avoid unnecessary volatility and safeguard financial stability, the IMF's Nassira Abbas and Tobias Adrian write in a new blog. To contain price pressures, many economies have started tightening monetary policy, leading to a sharp increase in nominal interest rates, with long-term bond yields, often an indicator of investor sentiment, recovering to pre-pandemic levels in some regions such as the United States. --More Risks: Investors often look beyond nominal rates and base their decisions on real rates—that is, inflation-adjusted rates—which help them determine the yield on assets. Low real interest rates induce investors to take more risks. Despite somewhat tighter monetary conditions and the recent upward move, longer-term real rates remain deeply negative in many regions, supporting elevated prices for riskier assets. --Asset Selling: Further tightening may still be required to tame inflation, but this puts asset prices at risk. More and more investors could decide to sell risky assets as those would become less attractive. China(Photo: zhaojiankang/iStock by Getty Images) China rebounded strongly from the pandemic, but growth is losing momentum while remaining overly dependent on support from investment and exports. Our latest Country Focus by the IMF's Chang Yong Rhee, Helge Berger and Wenjie Chen looks at how China can transition to sustained high-quality growth that’s balanced, inclusive and green. While China’s many challenges have no easy answer, the key message of the IMF’s annual Article IV review of the economy released this week is that rebalancing toward a more consumption-based model will boost growth prospects in the short term and deliver high-quality expansion in the long run. Importantly, it will also help bring the country closer to achieving its climate goal of carbon neutrality before 2060. --Green gains: Successfully rebalancing toward consumption will aid China’s climate aims by shifting activity to relatively untapped services industries and away from carbon-intensive industrial sectors. In fact, rebalancing alone can help cut carbon emissions by about 15 percent over the next three decades, according to IMF staff simulations. F&D(Image: iStock /AISLAN13) Quantum ComputersQuantum computers have the potential to accelerate scientific discovery and innovation, revolutionize financial market modeling and simulations, and empower machine learning and artificial intelligence. Yet these powerful computers pose risks, too, including cracking the hitherto impenetrable cryptographic codes that underpin financial stability, as we explain in the most recent issue of Finance & Development. Want to get a print copy delivered to your home or office? Click here to subscribe. | 
