Washington, 27 January 2022 (TDI): The global economy is set to face multiple pressures this year as the International Monetary Fund (IMF) projects that lower growth and higher inflation are going to be the biggest challenges going into this year.

The global economy faces multiple challenges as the pandemic enters its third year and the spread of the new Omicron variant has further exacerbated this.

Supply chain disruptions continue to be a major problem along with increasing energy and oil prices and rising inflation. Many countries have gone into record debt.

Central banks have to take a firmer stance in order to quell inflation. The gross domestic product is set to slow from 5.9% in 2021 to 4.4% in 2022 to 3.8% in 2023.

“The continuing global recovery faces multiple challenges as the pandemic enters its third year. The last two years reaffirm that this crisis and the ongoing recovery are like no other. Policymakers must vigilantly monitor a broad swath of incoming economic data, prepare for contingencies and be ready to communicate and execute policy changes at short notice.” -Gita Gopinath, IMF’s first deputy managing director.

The IMF reports global growth this year to be 4.4% which is 0.5% lower than what was previously forecasted. This is mainly due to lowered expectations with China and the United States.

China has seen a very weak recovery in the real estate sector while the U.S. faces an earlier withdrawal of monetary accommodation. The IMF lowered its forecast for U.S. economic growth to 4% from 5.2% in October 2021.

IMF also expects the country to tighten its monetary policy. Gita Gopinath added that the market is likely to be very volatile this year.

“This makes the job of the Fed even more important — to very, very clearly communicate how they are reading inflation and how they expect to respond to this over time.” -Gita Gopinath.

Other countries are also set to face lowered growth rates. The United Kingdom is forecasted to grow at a moderate rate of 2.3% in 2023, while Germany has also been hit with immense supply chain disruptions.

Elevated price pressures are expected to linger, with energy and food prices also set to increase throughout the year. Although inflation is expected to subside by 2023.

Developed economies are expected to return to their pre-pandemic trend in 2022, on the other hand developing economies are set to face major losses in output. The number of individuals living in extreme poverty has also crossed previous estimates.

There are currently estimated to be 70 million individuals living in extreme poverty around the world. The IMF suggests that in order to break this trend of downward growth and increasing inflation it is imperative that the grip the pandemic has on the world be broken.