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Omicron leads IMF to cut global economic forecast -- from about 6% to 4.4% -- for 2022

Omicron leads IMF to cut global economic forecast -- from about 6% to 4.4% -- for 2022
Traders are seen on the floor of the New York Stock Exchange on Wall Street in New York City on January 12. Tuesday's IMF forecast said it expects the U.S. economy to grow by 4% in 2022, a sizable downgrade from the last outlook in October. Photo by John Angelillo/UPI | License Photo

Jan. 25 (UPI) -- The International Monetary Fund released an updated global economic forecast for 2022 on Tuesday, and its outlook is worse for virtually all countries than it was just three months ago.

The IMF's last forecast, in October, said that it expected the global economy to grow by almost 6% this year. In Tuesday's update, the organization said that it now expects worldwide growth of 4.4%.

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Part of the reason for the downgrade, the IMF said, is that global economies are in a weaker position due to the abundance of the Omicron coronavirus variant -- which has prompted some countries to reimpose COVID-19 lockdowns, and thereby slowing their economic recovery.

Other factors include the rising cost of energy and supply chain bottlenecks, which have been a problem for months now.

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"Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging markets and developing economies," the IMF said in its forecast, which is titled "Rising Caseloads, A Disrupted Recovery, and Higher Inflation."

"Elevated inflation is expected to persist for longer than envisioned," it added, "with ongoing supply chain disruptions and high energy prices continuing in 2022.

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"Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds."

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Individually, the new forecast projects economic growth in the United States of 4% in 2022 -- down from 5.2% in the October outlook.

Part of the reason for the U.S. downgrade, the IMF said, is that President Joe Biden's Build Back Better Act -- a $1.2 trillion package of various spending and stimulus proposals -- has stalled in the U.S. Senate.

"Among changes to advanced economy forecasts for 2022, a revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation and continued supply chain disruptions have contributed to a downgrade of 1.2 percentage points for the United States," the 16-page report states.

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The forecast for China, which has the world's second-largest economy, is 4.8% for 2022 -- down from the IMF's 5.6% projection from October. It said Beijing's zero-tolerance COVID-19 policy and stress in Chinese real estate were factors in the dimmer outlook.

"The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective," the IMF added.

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Tuesday's forecast said that the IMF expects global growth to rebound in 2023 -- if the COVID-19 picture is more promising.

"Eventually, the shocks dragging 2022 growth will dissipate and -- as a result -- global output in 2023 will grow a little faster," the report states.\

"The upward revision to 2023 global growth is, however, not enough to make up ground lost due to the downgrade to 2022. Cumulative global growth over 2022 and 2023 is projected to be 0.3 percentage point lower than previously forecast."

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