As a result of higher energy prices and supply disruptions, inflation is higher and more widespread than expected, particularly in the United States and many emerging market and developing economies.

Global growth is projected to moderate from 5.9% in 2021 to 4.4% in 2022; half a percentage point lower in 2022 than forecast in the October edition of the World Economic Outlook (WEO report), largely because of a cut in projections for the two largest economies.

Continued supply disruptions generated a downward revision of 1.2 percentage points for the United States. For China, pandemic-attributable disruptions in the context of a zero-tolerance COVID-19 policy and prolonged financial stress among developers resulted in a 0.8 percentage point cut in projections.

Global growth is projected to slow to 3.8% in 2023. If that figure is 0.2 percentage points higher than the previous forecast, the upward correction mostly reflects a mechanical pickup once current growth drags disappear in the second half of 2022.

The IMF expects elevated inflation to continue longer than contemplated in the october issue and for supply chain disruptions and high energy prices to persist in 2022. Assuming inflationary expectations remain well anchored, inflation should gradually decline as supply-demand imbalances dissipate in 2022 and monetary policy in major economies responds.

In addition, supply chain disruptions, energy price volatility and specific wage pressures create a great deal of uncertainty around the inflation and policy trajectory.

As monetary policy rates in advanced economies rise, risks to financial stability, as well as to capital flows, currencies and fiscal positions in emerging market and developing economies could emerge, especially as debt levels have increased significantly over the past two years.