The International Monetary Fund on Tuesday slashed the global growth forecast for 2022 by 0.5 percentage point from its earlier estimate to 4.4 percent, with disruptions related to the COVID-19 pandemic and inflation weighing on the world's two largest economies.
Japan, meanwhile, saw its year-on-year growth projection revised upward by 0.1 point from the October projection to 3.3 percent, following the rollout of additional fiscal stimulus.
"The global economy enters 2022 in a weaker position than previously expected," the IMF said in its update of its World Economic Outlook report, citing the spread of the highly contagious Omicron variant of the coronavirus as well as rising energy costs and supply chain disruptions that have pushed up prices around the world.
IMF staff analysis suggests that supply disruptions, partly caused by elevated demand for goods overloading global supply chain networks amid the pandemic, shaved up to 1.0 point off global gross domestic product growth in 2021, according to the report.
The United States is expected to see growth at 4.0 percent in 2022, revised down by 1.2 points, reflecting continued supply shortages and the bleak prospects of passing a roughly $2 trillion fiscal policy package through Congress.
A faster-than-expected tightening of U.S. monetary policy to combat inflation has also contributed to the downward revision of the growth projection for the world's largest economy, according to the IMF.
The Federal Reserve in December decided to speed up the tapering of its massive bond-buying program, which has helped support the economy throughout the pandemic, and hinted at the possibility of three interest rate hikes this year.
China's economic output in 2022 is expected to be 0.8 point lower than the earlier projection at 4.8 percent, with private consumption likely to be lower than anticipated due to factors such as the country's radical "zero-COVID" strategy, leading to recurrent mobility restrictions.
In the euro area, prolonged supply constraints and pandemic-related disruptions have pushed the growth forecast down by 0.4 point to 3.9 percent.
In contrast, the IMF revised upward the global growth forecast for 2023 by 0.2 point to 3.8 percent, mainly reflecting a "mechanical pickup after current drags on growth dissipate in the second half of 2022."
Japan's 2023 growth outlook was also lifted by 0.4 point to 1.8 percent due to anticipated improvements in external demand and continued fiscal support, the Washington-based institution said.
Growth in the United States and the euro area in 2023 were also upgraded by 0.4 point and 0.5 point, respectively, to 2.6 percent and 2.5 percent, while the figure for China was trimmed by 0.1 point to 5.2 percent.
Inflation is expected to remain elevated in the near term, averaging 3.9 percent in advanced economies and 5.9 percent in emerging-market and developing economies in 2022, before subsiding in 2023, the report said.
The anticipated economic losses related to the pandemic are expected to be close to $13.8 trillion through 2024 relative to pre-pandemic forecasts, according to the IMF.