The chances of a global economic crash have lessened, the International Monetary Fund (IMF) reported on Tuesday.
The IMF raised its 2023 global growth prediction to 3%, up from 2.8% in an April assessment, the report said.
“Things are moving in the right direction,” IMF chief economist Pierre-Olivier Gourinchas told the Financial Times.
He said there was less concern about global growth slipping to 2% or below since the critical financial risks had abated.
“The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine. In the near term, the signs of progress are undeniable,” Gourinchas said in a blog post on Tuesday. “Yet many challenges still cloud the horizon, and it is too early to celebrate.”
The IMF said it remains concerned about tight credit, depleted U.S. household savings, and a slow recovery in China from COVID-19 lockdowns.
The IMF forecast comes as Federal Reserve considers raising interest rates. Analysts expect the Fed to announce a quarter-point hike at its meeting on Wednesday, The New York Times reported.
The Bank of England next week is expected to raise its rates to force inflation down in Britain. It has raised rates at 14 consecutive meetings.
The IMF said in a report that Russia’s attacks on Ukraine’s grain shipments have raised red flags.
“The war in Ukraine could intensify, further raising food, fuel, and fertilizer prices. The recent suspension of the Black Sea Grain Initiative is a concern in this regard,” the IMF report said.
“Such developments could contribute to additional volatility in commodity prices and hamper multilateral cooperation on providing global public goods,” the IMF added.
Global inflation has cooled but is still forecast to settle at 6.8% in 2023, the report said.
“The balance of risks to global growth remains tilted to the downside. Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy,” the report said.